Latest / Bloomberg Law / Weekend Law: Archegos Founder Convicted & the Politics of SCOTUS

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Weekend Law: Archegos Founder Convicted & the Politics of SCOTUS · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:09
Speaker 1: It's been called Wall Street's Trial of the Decade, a
0:12
Speaker 1: chest of the government's ambitious market manipulation theory, and on Wednesday,
0:17
Speaker 1: a Manhattan jury convicted Arkago's founder Bill Huang of fraud
0:22
Speaker 1: and market manipulation in a scheme that led to the
0:25
Speaker 1: implosion of that family office in twenty twenty one and
0:29
Speaker 1: cost investment banks more than ten billion dollars. Manhattan US
0:33
Speaker 1: attorney Damian Williams said that Wang had lied to banks
0:37
Speaker 1: to obtain billions of dollars that was used to inflate
0:40
Speaker 1: the stock price of check and media stocks in his portfolio.
0:44
Speaker 2: The wies fed the inflation, and the inflation fed more lies.
0:51
Speaker 2: Round and round it went. But last year the music stopped,
0:56
Speaker 2: the bubble burst, the prices dropped, and when they did,
1:01
Speaker 2: billions of dollars nearly evaporated overnight.
1:05
Speaker 1: During the two month trial, prosecutors took jurors inside the
1:09
Speaker 1: secretive family office through the testimony of bank insiders, former
1:13
Speaker 1: Archa ghost employees, including two star cooperating witnesses, and the
1:18
Speaker 1: unassailable evidence of recorded phone calls between Arcago's staffers and
1:23
Speaker 1: banks in the chaotic seventy two hours before the collapse.
1:28
Speaker 3: Frankly, you know, we don't see how we're going to
1:30
Speaker 3: be able to meet those margin calls fully by tomorrow
1:34
Speaker 3: evening at six o'clock, and so I wanted to get
1:37
Speaker 3: ahead of that and just describe what we are doing
1:41
Speaker 3: and so that you know where we're coming from on
1:44
Speaker 3: this and to give you our assurance that we will
1:48
Speaker 3: get through this very quickly.
1:49
Speaker 4: Yeah, we's got free and she competent, Bill gonna be okay.
1:55
Speaker 1: But the standout recording, this is Bill, Bill long Well
2:00
Speaker 1: Wang's conference call with some of the biggest investment banks
2:03
Speaker 1: in the world on the night before the implosion.
2:06
Speaker 4: We are very confident in our ability to wind down
2:12
Speaker 4: these names given little more time. I mean, today was
2:18
Speaker 4: a shock to me that some of these went bounds.
2:24
Speaker 1: At trial, the defense argued it was an unforeseeable black
2:28
Speaker 1: Swan event and that Huang was just an aggressive investor
2:32
Speaker 1: who believed in his holdings. Former CFO Patrick Halligan was
2:36
Speaker 1: also convicted of fraud and conspiracy, joining me to securities
2:40
Speaker 1: law expert James Park, a professor at UCLA Law School.
2:44
Speaker 1: Prosecutors claimed that Huang had engaged in a pump and
2:49
Speaker 1: brag scheme. Explain what he was convicted.
2:52
Speaker 5: Of, well, he was convicted of two things. The first
2:57
Speaker 5: was lying to various banks that enabled to to finan
3:01
Speaker 5: a strategy of accumulating significant amounts in stock of a
3:06
Speaker 5: number of publicly traded companies, so that was an independent
3:10
Speaker 5: set of charges. The second theory was that he manipulated
3:15
Speaker 5: the price of those stocks, that he manipulated them up
3:18
Speaker 5: in various ways through various techniques, and was reckless in
3:23
Speaker 5: a sense in his manipulation, so that the price of
3:26
Speaker 5: those stocks did not reflect supplying demand or investor demand,
3:31
Speaker 5: but rather was mainly determined by the trading of his
3:36
Speaker 5: hedge funds. Those are the two independent, although somewhat related
3:40
Speaker 5: theories that the jury concluded for the most part that
3:43
Speaker 5: the prosecution had met its burden of proof beyond a
3:47
Speaker 5: reasonable doubt.
3:48
Speaker 1: Would you characterize this as a big win for prosecutors
3:51
Speaker 1: in the Southern District.
3:53
Speaker 5: It's a huge win, and it was not a sporegone
3:56
Speaker 5: conclusion that they would win on the market manipulation charges.
4:00
Speaker 5: I think that the very difficult case the line to
4:02
Speaker 5: the banks. To me, I thought that was an easier theory.
4:05
Speaker 5: I would have been surprised if they did not win that.
4:08
Speaker 5: But the second set of charges of market manipulation, I
4:11
Speaker 5: think could have gone the other way, or it could
4:13
Speaker 5: have been a hung jury on that aspect of it.
4:16
Speaker 5: And I think that this is really going to add
4:19
Speaker 5: some key to the prohibition of market manipulation, which has
4:24
Speaker 5: been part of the Securities Act since the very beginning.
4:28
Speaker 5: That was one of the primary concerns of the drafters
4:31
Speaker 5: of the federal securities laws was the various manipulative tactics
4:36
Speaker 5: that were being used prior to the market crash of
4:39
Speaker 5: the nineteen twenties to inflate the price of stocks. That
4:43
Speaker 5: element of that statue, though, has gone fairly dormant for decades,
4:47
Speaker 5: and I think that this is really going to be
4:50
Speaker 5: a signature case with respect to market manipulation with respect
4:54
Speaker 5: to the stock market.
4:56
Speaker 1: I want to get the prosecutor's presentation of the case.
5:00
Speaker 1: The jury heard from a cavalcade of bank insiders and
5:04
Speaker 1: market experts, Arcago's staffers, and then the government's two star witnesses.
5:10
Speaker 1: What did you think of the way the prosecution framed
5:13
Speaker 1: and presented the case.
5:16
Speaker 5: I think they did a great job but one of
5:18
Speaker 5: the challenges of a case like this is you have
5:20
Speaker 5: a lajer just individuals who are selected randomly from the
5:24
Speaker 5: voting population. Those individuals do not necessarily have a sophisticated
5:29
Speaker 5: understanding finance and how the industry works. And so I
5:34
Speaker 5: think part of the challenge of the case that the
5:37
Speaker 5: prosecutors understood was that you needed to provide a foundation
5:41
Speaker 5: and educate the jury about what exactly the misconduct was.
5:45
Speaker 5: And bringing in a number of industry experts enabled the
5:49
Speaker 5: prosecutors to do that. And having insiders within the funds
5:55
Speaker 5: who are cooperating witnesses I think was important, not only
5:59
Speaker 5: because they were able to provide testimony that implicated Quang
6:03
Speaker 5: and the financial officer of our Kagos, but they also
6:07
Speaker 5: provided some background about the fund and how it worked
6:10
Speaker 5: and how trading works. And so it's really the job
6:14
Speaker 5: of the prosecutor to educate the jury and tally coherent story,
6:18
Speaker 5: which they successfully did.
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Speaker 1: The judge throughout the trial was trying to keep the
6:24
Speaker 1: trial moving along, and when they had, you know, mind
6:26
Speaker 1: numbing stock charts and technical slides over and over, he said,
6:31
Speaker 1: the jury looks like it's bored to tears were going
6:34
Speaker 1: over the same point over and over again. That might
6:38
Speaker 1: have helped the prosecution.
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Speaker 5: Actually, I think so. I think it's a very experienced
6:43
Speaker 5: trial judge in the Southern District of New York who
6:46
Speaker 5: is very very knowledgeable about juries and how they work,
6:51
Speaker 5: how trials work. And you know, he said that on
6:53
Speaker 5: both sides, tried to get both sides to move along,
6:57
Speaker 5: and that's you know, part of what a trial judge
6:59
Speaker 5: said supposed to do is manage the case. And you
7:03
Speaker 5: know that sometimes involved making suggestions about how the trial
7:08
Speaker 5: is going. And he's there in the courtroom watching the
7:11
Speaker 5: jury and he's hearing the testimony. So you know, his
7:15
Speaker 5: commentary I think was interesting to hear, and it, you know,
7:19
Speaker 5: reflects I think the concern of cases like this is
7:22
Speaker 5: that they become just so complicated that the jury is
7:26
Speaker 5: not really able to understand the case. And so I
7:30
Speaker 5: think his goal in making these comments is to, you know,
7:33
Speaker 5: make sure that we have a fair trial here, a
7:37
Speaker 5: trial that is going to result in a coherent body
7:41
Speaker 5: of facts that the jury can understand and make their
7:45
Speaker 5: decision based upon.
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Speaker 1: The prosecutors seem to do a good job of sort
7:49
Speaker 1: of bringing the jurors into Archagos and the trading there,
7:54
Speaker 1: showing how closely Huang guided his traders with an ongoing
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Speaker 1: zoom call throughout a trading day, and how he was
8:01
Speaker 1: a micro manager and tough on them, with one of
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Speaker 1: the prosecution's star witnesses, the firm's former head trader, William Timido,
8:10
Speaker 1: describing how Huang told him to lie and directed him
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Speaker 1: to manipulate stock prices.
8:16
Speaker 5: Yes, they brought these events to light, and that since
8:19
Speaker 5: another challenge of pieces like this is that you know,
8:22
Speaker 5: this is something that happened a few years ago, and
8:25
Speaker 5: you're not there, you're not actually within the fund and
8:28
Speaker 5: seeing the panic and the environment, and that's part of
8:31
Speaker 5: telling the story with these various witnesses. And I think
8:34
Speaker 5: another thing the prosecution was trying to do was establish
8:38
Speaker 5: the culture of the firm, which was clearly dominated by
8:43
Speaker 5: mister Wang. And I think part of the reason they
8:46
Speaker 5: needed to do this was that one of the defenses
8:49
Speaker 5: that Huang made, essentially was that some of these lies
8:53
Speaker 5: were told by subordinates, and Wang himself never said very
8:57
Speaker 5: much to the bank, and the defense might be that
9:00
Speaker 5: my subordinates are doing this without my knowledge, and they're
9:04
Speaker 5: just doing this on their own and I think part
9:06
Speaker 5: of establishing the way the firm worked was an effort
9:10
Speaker 5: to show that these subordinates are not acting independently. They
9:14
Speaker 5: are controlled by mister Wong, and so it's implausible that
9:18
Speaker 5: they would have lied without Fung's knowledge and direction.
9:23
Speaker 1: So the victims here weren't average investors, they were banks.
9:26
Speaker 1: And the defense had planned to argue that the banks
9:29
Speaker 1: were sophisticated players and they knew the risks of dealing
9:32
Speaker 1: with a family office not required to publicly disclose its holdings,
9:37
Speaker 1: but they went ahead because of the feast they earned.
9:39
Speaker 1: But Judge Hellerstein really restricted the defense's ability to cast
9:45
Speaker 1: blame on the banks. Do you think that hurt the
9:48
Speaker 1: defense a lot? And might be a point on appeal.
9:51
Speaker 5: It's a really good question, and certainly evidentiary issues like
9:56
Speaker 5: that can certainly be raised on appeal, and that's typically
10:00
Speaker 5: what the appellate judges will look at. They will look
10:03
Speaker 5: at legal decisions made by the trial court. I mean,
10:07
Speaker 5: that could be a basis of an argument that the
10:10
Speaker 5: defendants did not get a fair trial in the case.
10:13
Speaker 5: On the other hand, you know, the argument that the
10:17
Speaker 5: judge would make to exclude that evidence is that it's
10:20
Speaker 5: not directly relevant on the legal issue of you know,
10:24
Speaker 5: was somebody lying, were their lives? You know, narrowing the issue,
10:28
Speaker 5: narrowing the evidence so as not to confuse the jury
10:31
Speaker 5: is something that is typically within the discretion of the
10:35
Speaker 5: trial court. And Judge Hellestein made the call that these
10:39
Speaker 5: sorts of arguments were just not relevant on the central
10:42
Speaker 5: issue of whether or not there was a fraud. And
10:45
Speaker 5: you know, there's an argument in support of what he did,
10:48
Speaker 5: and that the question of whether the banks, whether they
10:52
Speaker 5: were responsible to some extent, that might be more of
10:54
Speaker 5: a broader policy issue as opposed to an issue as
10:58
Speaker 5: to whether or not there was a legal violation. And
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Speaker 5: I think that securities laws do not necessarily depend upon
11:07
Speaker 5: how sophisticated the victim was. Even very sophisticated investors can
11:13
Speaker 5: be fooled by a lot and we, to some extent
11:17
Speaker 5: all rely upon trust in this industry. And even if
11:21
Speaker 5: we are sophisticated and the banks know they should be careful,
11:25
Speaker 5: there are situations where they can be victims of fraud.
11:28
Speaker 5: And the other thing that struck me about this case
11:30
Speaker 5: was just how much power this particular fund had and
11:34
Speaker 5: just the amount of resources at its disposal, and so
11:39
Speaker 5: you know, the reality of this world is that you know, banks,
11:42
Speaker 5: they're still large players, but they may be less significant
11:45
Speaker 5: players relative to these huge private funds that have huge
11:49
Speaker 5: amounts of wealth and resources. And so there's an argument
11:54
Speaker 5: that they're equals, right, and equals can certainly defraud each other.
11:58
Speaker 5: And so I think that does those sorts of issues
12:01
Speaker 5: that this particular ruling raises.
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Speaker 1: And the jury deliberated for nearly two days. One of
12:07
Speaker 1: the jurors said he was on the fence during most
12:09
Speaker 1: of the trial because he had worked on Wall Street
12:11
Speaker 1: for more than three decades. But he said Huang condemned
12:15
Speaker 1: himself because he was trading on such a large scale
12:18
Speaker 1: and it had a manipulative impact on stocks.
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Speaker 5: It's a great point, and the main argument as to
12:25
Speaker 5: why this would not be criminal manipulation is that you know,
12:29
Speaker 5: these practices happened, right putting in a bunch of orders
12:33
Speaker 5: at the end of the trading day and using your
12:36
Speaker 5: trading in order to move the price. That is something
12:40
Speaker 5: that happens a lot. The difference was the extent of
12:44
Speaker 5: the trading, the power that this fund had to control.
12:50
Speaker 5: In many cases, more than half of the publicly available stock,
12:54
Speaker 5: and that's that's different. That puts you in a somewhat
12:57
Speaker 5: different position than somebody who, you know, maybe own three
13:01
Speaker 5: or four percent of a company's stock. You just have
13:05
Speaker 5: more ability to move the prices. And in terms of
13:09
Speaker 5: victim harm, the public was harmed by the manipulation because
13:13
Speaker 5: if you're buying at these inflated prices and the stock
13:16
Speaker 5: price collapses, you lost money.
13:18
Speaker 4: Right.
13:18
Speaker 5: So, certainly the theory about lying to the banks that
13:21
Speaker 5: involve sophisticated investors, but we're talking about a manipulation like
13:25
Speaker 5: this that is also going to affect ordinary retail investors.
13:31
Speaker 5: And you know, just the amount of the trading sheer
13:33
Speaker 5: power that he had and the abuse of that, along
13:37
Speaker 5: with evidence that you know this was intended to manipulate
13:41
Speaker 5: and artificially increase the prices that turned out to be sufficient.
13:46
Speaker 1: Do you think that the definition of market manipulation could
13:50
Speaker 1: be a point that defense raises on appeal?
13:53
Speaker 5: It'll be an issue and there are not a whole
13:57
Speaker 5: lot of cases defining what market man is. Are there
14:01
Speaker 5: manipulative activities? Secondly, and most importantly, was their manipulative intent?
14:07
Speaker 5: Was their fraudulent intent? And I don't expect the second
14:11
Speaker 5: Circuit to take this as an opportunity to more precisely
14:15
Speaker 5: define market manipulation. I think what they'll do is apply
14:19
Speaker 5: these broad principles in relation to the facts that were
14:23
Speaker 5: established at trial, and I think that this will be
14:27
Speaker 5: an example of things that has to happen for there
14:30
Speaker 5: to be market manipulation, and I suspect the second Circuit
14:34
Speaker 5: will be careful to limit the decision to its facts.
14:39
Speaker 5: You know, they will highlight some of the unusual aspects
14:43
Speaker 5: of this situation. Particularly, I think they will highlight the
14:47
Speaker 5: fact that the hedge fund had significant amounts of the
14:52
Speaker 5: public float of these stocks, and so I think they
14:55
Speaker 5: will highlight those unusual circumstances so that they will not
14:59
Speaker 5: necessarily cover various practices that may be fairly common in
15:03
Speaker 5: the industry. I think they will really try to limit
15:06
Speaker 5: and really write a very fact specific opinion. But even
15:09
Speaker 5: if they do that, it's still significant because this will
15:12
Speaker 5: be an iconic case. It'll be a reference point for
15:16
Speaker 5: future market manipulation prosecutions. It'll be something that I think
15:20
Speaker 5: a lot of compliance officers are going to read very carefully,
15:24
Speaker 5: and I think it will in some ways change industry practices.
15:28
Speaker 1: So Jim he's going to be sentenced on October twenty eighth,
15:31
Speaker 1: and theoretically each count carries a maximum of twenty years
15:35
Speaker 1: in prison. Do you have any feel for what he's
15:38
Speaker 1: likely to get.
15:40
Speaker 5: I think it'll be a significant sentence, given you know,
15:44
Speaker 5: the seriousness of the charges, the impact on investors. The
15:49
Speaker 5: first set of charges is really about lie about fraud,
15:53
Speaker 5: and then that is something that court take very seriously.
15:57
Speaker 5: On the market manipulation charges, maybe the argument would be
16:01
Speaker 5: that the law was somewhat unclear on this point. It's
16:04
Speaker 5: what I would argue as a defense attorney that he
16:08
Speaker 5: just didn't know what exactly the law was, and so
16:11
Speaker 5: he should get a little bit of leniency with respect
16:13
Speaker 5: to the market manipulation claims. So I would expect that
16:17
Speaker 5: the bulk of the sentence would most likely be relating
16:21
Speaker 5: to the lying to the banks. I think that is
16:24
Speaker 5: the one that is sort of more clearly an established
16:27
Speaker 5: crime that the judge will recognize that there really is
16:31
Speaker 5: no excuse for what happened there. So I think there
16:33
Speaker 5: will be a serious sentence here. And you know, you
16:36
Speaker 5: think about the reference point is maybe Sam Bankman Freed's sentence.
16:41
Speaker 5: Think about the theory there is that he misappropriated customer
16:45
Speaker 5: funds so he could speculate on various crypto investments. And
16:49
Speaker 5: you could argue that in this case, it was not
16:52
Speaker 5: stealing funds, but it was lying to get funds in
16:56
Speaker 5: order to artificially inflate these various positions. And so so,
17:00
Speaker 5: you know, could it be in the same range of
17:03
Speaker 5: Sam Bankman freed sentence I believe was in the neighborhood
17:06
Speaker 5: of around thirty years or so. Possibly. I imagine there
17:09
Speaker 5: are other considerations though, that will come into play that
17:14
Speaker 5: you know, the defense attorneys will argue make this case different.
17:17
Speaker 5: But I would be surprised if the prosecutors did not
17:20
Speaker 5: at least try to argue for a similar type of sentence.
17:24
Speaker 1: One difference is that Huang is sixty years old, whereas
17:29
Speaker 1: Sam Bankman Freed is thirty two. So a long sentence
17:33
Speaker 1: might mean life in prison for Wang. We'll see what
17:36
Speaker 1: the judge decides on October twenty eighth. Thanks so much, Jim.
17:40
Speaker 1: That's Professor James Park of UCLA Law School coming up next.
17:44
Speaker 1: The impact of the Supreme Court curbing federal agency power
17:48
Speaker 1: is already being felt. I'm June Grosso and you're listening
17:52
Speaker 1: to Bloomberg during oral arguments. In January, Liberal Justice Katanji
17:57
Speaker 1: Brown Jackson warned about the consequences avoiding the Chevron Doctrine,
18:03
Speaker 1: a forty year old precedent in which courts deferred to
18:07
Speaker 1: a federal agency's reasonable interpretation of unclear laws.
18:11
Speaker 6: The way I've been thinking about Chevron is Congress has
18:14
Speaker 6: given that policy choice to the agency, and my concern
18:19
Speaker 6: is that if we take away something like Chevron, the
18:23
Speaker 6: Court will then suddenly become a policy maker by majority
18:29
Speaker 6: rule or not making policy determinations.
18:32
Speaker 1: But the six conservative justices ignored her concerns and threw
18:37
Speaker 1: out Chevron, and it took less than a week for
18:40
Speaker 1: Justice Jackson's fears to be realized. Several federal judges barred
18:45
Speaker 1: agencies from enforcing Biden administration rules, substituting their opinion for
18:50
Speaker 1: that of the Departments of Education and Health in human Services,
18:54
Speaker 1: the rules prohibiting transgender discrimination in public schools and health
19:00
Speaker 1: care were the first to fall. Joining me is an
19:03
Speaker 1: expert in administrative law, Carrie Coliniesi, a professor at the
19:07
Speaker 1: University of Pennsylvania Law School. I want to start with
19:10
Speaker 1: the broad question your reaction to the Supreme Court's decision
19:14
Speaker 1: eliminating the Chevron doctrine.
19:17
Speaker 7: Well, we knew that the Court, or at least a
19:19
Speaker 7: good number of justices on the Court, were critical of
19:22
Speaker 7: the Chevron decisions. So in some sense it's not terribly surprising,
19:27
Speaker 7: But in another sense, it is quite dramatic, because, first
19:32
Speaker 7: of all, the Supreme Court seldom overturns any of its decisions.
19:36
Speaker 7: That's a rare event. But also in this case, this
19:40
Speaker 7: had been a decision that was one of the most
19:43
Speaker 7: widely cited of all Supreme Court decisions, and certainly one
19:47
Speaker 7: of the most widely cited in the administrative law world,
19:50
Speaker 7: that area of law that governs the operation of government agencies.
19:55
Speaker 7: So there's a real potential for a lot of mischief
19:59
Speaker 7: and confused usion and further contestation when the Court overturns
20:04
Speaker 7: the decision that's been so widely cited like this one.
20:07
Speaker 1: It seems judges have been emboldened to override federal agencies.
20:12
Speaker 1: Last week, just four days after the decision eliminating Chevron,
20:16
Speaker 1: a judge in Kansas blocked an Education Department rule that
20:20
Speaker 1: bars discrimination against children in schools based on their gender identity,
20:25
Speaker 1: and two days after that, federal judges in Mississippi, Florida,
20:29
Speaker 1: and Texas all barred the Department of Health and Human
20:32
Speaker 1: Services from enforcing a rule that prohibits healthcare discrimination against
20:37
Speaker 1: people based on their sexual orientation or gender identity. Are
20:42
Speaker 1: you surprised that the courts are acting so quickly?
20:45
Speaker 8: Not really.
20:46
Speaker 7: First of all, you know, there are many district court
20:49
Speaker 7: judges that have I think an affinity with the majority
20:53
Speaker 7: on the Supreme Court in their skepticism toward administrative agencies
20:57
Speaker 7: and the exercise of authority by administrative agencies, and certainly
21:02
Speaker 7: on some of these hot button kinds of issues today
21:05
Speaker 7: in American culture wars. The lower courts have been caught
21:09
Speaker 7: up in these kinds of matters even before the Supreme
21:13
Speaker 7: Court overturned Chevron, So that's not terribly surprising. On the
21:17
Speaker 7: other hand, it is also the case that the Supreme
21:20
Speaker 7: Court has sent a very strong signal to lower court
21:24
Speaker 7: judges to take on administrative agencies, to embrace your skepticism
21:30
Speaker 7: and assert your power over these agencies. That is, I
21:34
Speaker 7: think the dramatic symbolic import of the Court's decision in
21:38
Speaker 7: the Lower Bright Enterprises case that overturn Chevron.
21:42
Speaker 1: So in those three cases it turned on the agency's
21:46
Speaker 1: interpretation of the word sex under the Affordable Care Act
21:49
Speaker 1: and Title nine.
21:51
Speaker 8: So are these.
21:51
Speaker 1: Judges then substituting their own interpretation of what the word
21:56
Speaker 1: means for the agency? And I mean, how are they
21:59
Speaker 1: coming up with this?
22:00
Speaker 7: Well, that's what the Supreme Court has told lower court judges.
22:04
Speaker 7: Their responsibility is to find the one and only one
22:09
Speaker 7: best meaning of a statute based upon the judge's own
22:14
Speaker 7: sense of what the statute should mean, not giving the
22:17
Speaker 7: kind of deference that the agency would have been afforded
22:21
Speaker 7: in the past under the Chevron doctrine. The Chevron doctrine
22:25
Speaker 7: came into play when statutes were ambiguous what does sex mean?
22:30
Speaker 7: A statute could mean gender, It could mean anything related
22:35
Speaker 7: to gender, you know. It could be narrow, it could
22:38
Speaker 7: be broad. And that ambiguity under Chevron would have often
22:43
Speaker 7: been seen as justifying an inquiry into whether the agency
22:48
Speaker 7: had been delegated the authority to make the call about
22:51
Speaker 7: what that ambiguous phrase or term meant, And as long
22:55
Speaker 7: as the agency was reasonable, courts were obligated to go
22:59
Speaker 7: with what the agency held. That's now changed, and in
23:03
Speaker 7: the face of ambiguity, the obligation of the lower Court
23:07
Speaker 7: is to substitute its own decision, and maybe it will
23:11
Speaker 7: agree with the agency, maybe it won't. It certainly should
23:14
Speaker 7: listen to and gear the argument from the agency, but
23:18
Speaker 7: it doesn't have to follow it in the same way
23:20
Speaker 7: that it was supposed to under the Chevron doctrine.
23:23
Speaker 1: Does the agency argument get any kind of weight outside
23:27
Speaker 1: of you know, any litigant coming up and arguing a case.
23:31
Speaker 1: Is there any more weight at all to an agency's interpretation?
23:35
Speaker 7: Well, not really, although it's also not entirely clear what
23:41
Speaker 7: the Supreme Court majority thinks should be given. You know,
23:44
Speaker 7: there are passages in the lower Bright decision that say,
23:49
Speaker 7: first of all, the agency should have its interpretation be
23:53
Speaker 7: treated with respectful consideration. It may well have the power
23:58
Speaker 7: to persuade the Court on or an older decision called Skidmore.
24:03
Speaker 7: And it's also possible if you could read some passages
24:06
Speaker 7: in the Loco Bright decision where the Supreme Court majority
24:10
Speaker 7: has recognized that there may be evidence that Congress actually
24:14
Speaker 7: intended to delegate to the agency the decision about what
24:19
Speaker 7: the statute means. So in all those situations, the agency's
24:24
Speaker 7: interpretation will have some weight, but it won't have the
24:29
Speaker 7: same kind of weight that it would have under the
24:33
Speaker 7: Chevron doctrine.
24:34
Speaker 1: The district courts that I mentioned were all conservative. So
24:38
Speaker 1: what happens if the same issue comes up in a
24:41
Speaker 1: different district court, let's say in New York or California,
24:45
Speaker 1: and the court has a different interpretation of what the
24:47
Speaker 1: word sex means. What happens?
24:49
Speaker 8: Then?
24:50
Speaker 7: Yeah, we're going to end up with a situation where
24:52
Speaker 7: we have competing judges, each giving their own best interpretation
24:57
Speaker 7: of the statute, and within their districts, or if it's
25:01
Speaker 7: at the Court of Appeals level, within their circuits, there
25:05
Speaker 7: will be competing definitions. Maybe the Supreme Court will step
25:09
Speaker 7: in and resolve some of these, but the Supreme Court
25:11
Speaker 7: only here's what sixty or seventy or so cases per year.
25:17
Speaker 7: So we're going to be living with I think a
25:19
Speaker 7: lot more flux and conflict, and maybe one might even
25:23
Speaker 7: say chaos in the law as these different judges reach
25:28
Speaker 7: potentially different interpretations on their own accord. Following the Lower
25:32
Speaker 7: Bright decision.
25:34
Speaker 1: The opinion mentioned starry decisis, which basically means following precedence
25:39
Speaker 1: about forty times. What role does story decisives play here?
25:44
Speaker 7: Well, that's also a point of potential chaos from this decision.
25:49
Speaker 7: Because Chevron had been so widely cited, new questions now
25:53
Speaker 7: are arising about what is the status of old agency
25:59
Speaker 7: interpretation that had been previously litigated and upheld under the
26:04
Speaker 7: Chevron doctrine. The Court did anticipate this issue to some degree,
26:10
Speaker 7: but it addressed it only in a very brief section
26:14
Speaker 7: of its opinion, and in a way that isn't quite
26:18
Speaker 7: crystal clear itself, and will only i think, breed further
26:21
Speaker 7: confusion and lesser until the Court steps in and tries
26:25
Speaker 7: to clarify things. But in brief, the Court said that
26:28
Speaker 7: prior to specific agency actions that had been undertaken under
26:34
Speaker 7: a position or an interpretation approved under the Chevron doctrine,
26:38
Speaker 7: those specific agency actions could not be overturned just because
26:43
Speaker 7: the Court was overturning Chevron. But there's a whole host
26:47
Speaker 7: of ambiguities and questions about what all that means. So
26:51
Speaker 7: it probably means that if somebody has a permit or
26:54
Speaker 7: a license, or been the beneficiary of some immigration decision
26:59
Speaker 7: in the pass that was handed down under a policy
27:03
Speaker 7: approved by courts under the Chevron doctor, that those specific
27:06
Speaker 7: actions can't be overturned. But it doesn't mean necessarily that
27:11
Speaker 7: the prior statutory interpretations can't be challenged in new permit
27:16
Speaker 7: denials or licensed denials or adverse immigration decisions that might
27:21
Speaker 7: come up. So you're likely to see old interpretations now
27:25
Speaker 7: that had seemingly been settled law, sometimes perhaps for years
27:30
Speaker 7: or not decades, being reopened and revisited.
27:33
Speaker 1: So is this the Court taking more power for the courts?
27:38
Speaker 7: Yeah, this is of a piece with other decisions that
27:41
Speaker 7: are making the Court a more central player within modern government,
27:47
Speaker 7: probably more central than it's been for at least fifty years,
27:50
Speaker 7: if not more. The overturning of Chevron means that the
27:54
Speaker 7: Court must decide questions of statutory interpretation and agencies don't
28:00
Speaker 7: merit anything more than perhaps respectful consideration. But it's also
28:05
Speaker 7: something to combine with another decision that the Court handed
28:09
Speaker 7: down at the end of the term that allows new
28:12
Speaker 7: businesses to form and to have the ability to essentially
28:17
Speaker 7: obliterate the statute of limitations that might otherwise apply because
28:22
Speaker 7: they weren't in existence at the time an agency undertook
28:26
Speaker 7: an action and reopened again settled rules. It's of a
28:30
Speaker 7: piece with another decision handed down this term that was
28:34
Speaker 7: decided on Seventh Amendment grounds that Darchisi decision that holds that,
28:40
Speaker 7: at least in the Securities and Exchange Commission context, when
28:44
Speaker 7: dealing with civil penalties for fraud, the agency's tribunals cannot
28:49
Speaker 7: decide the matter. They have to go to jury's in
28:53
Speaker 7: the Article three Courts. That decision itself, I suspect will
28:58
Speaker 7: not be the last word, and we might see other
29:02
Speaker 7: agencies internal tribunals in future years needing to go to
29:06
Speaker 7: Article three courts. So we're going to have a lot
29:08
Speaker 7: more business for the judiciary, and that raises a host
29:12
Speaker 7: of institutional capacity questions about whether the courts are going
29:15
Speaker 7: to be capable of resolving these matters in a timely
29:19
Speaker 7: and informed manner.
29:21
Speaker 1: So they're not done dismantly the administrative state yet.
29:25
Speaker 7: I think the administrative state is certainly going to be around,
29:27
Speaker 7: but it's going to be a different one, and its
29:30
Speaker 7: relationship with the courts and the court's relationship with it
29:33
Speaker 7: have definitely shifted. And the US Supreme Court majority here
29:37
Speaker 7: has signaled to the rest of government that the old
29:41
Speaker 7: ways are over and it wants everybody at the lower
29:46
Speaker 7: court level and throughout the agencies to take a more
29:50
Speaker 7: skeptical view of administrative authority being exercised by agencies that
29:55
Speaker 7: have been delegated that authority by Congress, but now are
29:59
Speaker 7: going to be subject to a much more muscular approach
30:03
Speaker 7: by the courts.
30:04
Speaker 1: I'm sure we're going to be discussing this over and
30:06
Speaker 1: over again in the future. Thanks so much for your insights, Carrie.
30:10
Speaker 1: That's Professor carry Coliniesi of the University of Pennsylvania Law School,
30:14
Speaker 1: coming up next on the Bloomberg Law Show. The Roberts
30:17
Speaker 1: Court is looking more and more political. But how different
30:21
Speaker 1: is that from Supreme courts in the past. I'm June
30:24
Speaker 1: Grosso and this is Bloomberg with another transformational term. The
30:30
Speaker 1: conservative super majority on the Supreme Court left no doubt
30:34
Speaker 1: that a revolution is under way, pushing ahead to attain
30:37
Speaker 1: its long term goals without much regard for precedent. Among
30:41
Speaker 1: other things, the six Republican appointed justices slashed the power
30:46
Speaker 1: of regulators, granted broad immunity from criminal prosecution for former
30:51
Speaker 1: President Donald Trump, made it harder to challenge voting maps
30:55
Speaker 1: as racially gerrymandered, and found that homeless people sleeping on
30:59
Speaker 1: the street can be sent to jail. So what can
31:02
Speaker 1: be done about a court issuing landmark rulings changing the
31:06
Speaker 1: law for the third year in a row. Here's Chief
31:09
Speaker 1: Justice John Roberts answer that question twelve years ago.
31:13
Speaker 2: Well, I think the important thing to understand is that
31:17
Speaker 2: there are three branches of government, and two of them
31:19
Speaker 2: are political. And if you don't like what the Congress
31:22
Speaker 2: is doing, you're congressman. You can throw them out of office.
31:25
Speaker 2: If you don't like what the President is doing, can
31:27
Speaker 2: throw him out of office. If you don't like what
31:30
Speaker 2: I'm doing, it's just too bad. And now most people
31:35
Speaker 2: would say, how can that be?
31:37
Speaker 3: You do?
31:38
Speaker 2: The cases are pretty important and you need to understand, Well,
31:41
Speaker 2: it's because the Framers didn't want the courts to be
31:44
Speaker 2: making political decisions.
31:46
Speaker 1: Well, seven out of ten Americans feel the Court is
31:49
Speaker 1: making political decisions, shaping the law to fit the justice's
31:53
Speaker 1: own ideologies, according to an ap nork pole conducted last month.
31:58
Speaker 1: But is the Roberts Court any different from other Supreme
32:02
Speaker 1: courts in our history? Joining me is Anthony Michael Christ,
32:05
Speaker 1: a professor at the Georgia State University College of Law,
32:09
Speaker 1: who's written about this. People are bemoaning how the Supreme
32:13
Speaker 1: Court has become so political. But you write that the
32:17
Speaker 1: Supreme Court always has been political and that the Court
32:20
Speaker 1: has never been an apolitical arbiter of the constitution. Tell
32:25
Speaker 1: us why.
32:26
Speaker 8: So, you know, the Supreme Court has two important features
32:30
Speaker 8: in terms of how justice think. The first one is
32:33
Speaker 8: that they're members of society, and so you know, society
32:37
Speaker 8: has kind of dominant main streme views and those that
32:40
Speaker 8: are very much on the outside, and justices, much like
32:43
Speaker 8: your average citizens, is going to internalize those views, internalize
32:48
Speaker 8: those changing dynamics in society and current events and all
32:51
Speaker 8: the like, and their jurisprudence is going to sometimes be
32:55
Speaker 8: affected by that. But then the other thing that's even
32:58
Speaker 8: more important in terms of the Supreme Court jurisprudential outcomes
33:02
Speaker 8: is the fact that it is the byproduct of big
33:05
Speaker 8: political coalition that elect presidents and that elect majorities in
33:10
Speaker 8: the Senate. That then creates this dynamic where you get
33:13
Speaker 8: a president who appoints justice the Supreme Court who also
33:17
Speaker 8: reflects their ideological commitments. And so generally speaking, because of
33:22
Speaker 8: these two different features of how justices get picked and
33:26
Speaker 8: how they just operate as regular members of society, right,
33:28
Speaker 8: they're not for medically sealed off from the rest of us.
33:31
Speaker 8: You know, the courts tend to reflect majoritarian views. Certainly,
33:35
Speaker 8: I think there's a case to be made that this court,
33:38
Speaker 8: the Roberts Court, and as the Roberts Court is currently constituted,
33:42
Speaker 8: a lot of people may say this well outside of
33:45
Speaker 8: the kind of mainstream views of the average American today,
33:49
Speaker 8: And I think there was an argument made for that,
33:51
Speaker 8: for sure. But generally speaking, the Supreme Court, contrary to
33:55
Speaker 8: what most of us have been taught in law school
33:57
Speaker 8: and in college for years and years and years, it's
33:59
Speaker 8: not account of George Tian institution.
34:01
Speaker 1: And you see the Roberts Court as the living embodiment
34:05
Speaker 1: of the Reagan Revolution of the nineteen eighties, just as
34:08
Speaker 1: the Warren Court in the fifties and sixties mirrored the
34:12
Speaker 1: values of the New Deal.
34:14
Speaker 8: Certainly, there's similar dynamics in that both courts overturned a
34:17
Speaker 8: lot of precedent. People generally don't see the Warren Court
34:21
Speaker 8: as being at a step with the average Americans view
34:25
Speaker 8: during that period because the New Deal coalition was dominant
34:28
Speaker 8: and they won outright majorities both in Congress and substantial
34:32
Speaker 8: majorities time and again in terms of sending a president
34:35
Speaker 8: to the White House, and even Republicans who were more
34:38
Speaker 8: conservative than the average Democrat at the time tends to
34:42
Speaker 8: be more liberal, and so the views of the average
34:45
Speaker 8: politicians who was electable in that time period was very
34:48
Speaker 8: much in sync with the average view of the typical
34:51
Speaker 8: Supreme Court justice at the time. Why I think people
34:54
Speaker 8: seem more skeptical of this court is because, unlike the
34:59
Speaker 8: Warren Court, for for example, Donald Trump when he was
35:01
Speaker 8: first elected, never cured a popular vote majority, and I
35:05
Speaker 8: think in terms of public opinion pulling really never cracked
35:09
Speaker 8: a majority of Americans supporting his presidency. And at the
35:12
Speaker 8: same time, there was a dynamic that occurred in the
35:15
Speaker 8: Senate where Donald Trump's Supreme Court nominees, unlike every nominee
35:19
Speaker 8: in the years past, was unable to secure a majority
35:24
Speaker 8: of Senators who confirm the nomination who also represented a
35:28
Speaker 8: majority of Americans because the Senate has become so malaportioned
35:33
Speaker 8: based on population. And so I think part of the
35:36
Speaker 8: anxiety that you see, particularly from the center, center, left
35:40
Speaker 8: and left of the political spectrum here in the United States,
35:43
Speaker 8: that is a byproduct of the feeling that the Preme
35:46
Speaker 8: Court is representing minoritarian on minoritarian on minoritarian interests and
35:52
Speaker 8: not in step with kind of the general flow and
35:55
Speaker 8: trajectory of the American body politics, as was the case
35:58
Speaker 8: perhaps in the nineteen fifty in nineteen sixties. So there
36:01
Speaker 8: are similarities in terms of the court reflecting winning coalitions
36:05
Speaker 8: to a certain extent, both between the Warren Court and
36:07
Speaker 8: the Roberts Court. But I think there are also very
36:10
Speaker 8: significant qualitated differences in terms of where we are in
36:13
Speaker 8: the kind of a longer term trajectory in American politics.
36:16
Speaker 1: So let's talk about a few of the cases this term.
36:19
Speaker 1: There was a case involving the Eighth Amendment's prohibition against
36:22
Speaker 1: cruel and unusual punishment as it applied to homelessness, and
36:27
Speaker 1: it was one of eleven cases this term where the
36:30
Speaker 1: Court was divided sixty three down ideological lines, with the
36:35
Speaker 1: liberal justices in the minority.
36:37
Speaker 8: So, in a case called City of Grant's Past, the
36:41
Speaker 8: Supreme Court said that it does not violate the Eighth
36:44
Speaker 8: Amendments ban on cruel and unusual punishment to essentially criminalize
36:50
Speaker 8: people from camping in public spaces. The majority basically said, well,
36:54
Speaker 8: you know, this is not a problem like you essentially
36:56
Speaker 8: have choices here, and that's that there's no conscious foutional
37:00
Speaker 8: refuge or shield here under the Eighth Amendment. Whereas I
37:04
Speaker 8: think that the centers understood the bind that people face
37:07
Speaker 8: in these very tough situations, I think what's telling in
37:10
Speaker 8: some respects, at least for me as a scholar of
37:13
Speaker 8: political history. You know, so much of this court is
37:16
Speaker 8: hell bent on originalist principles. And it's kind of ironic
37:20
Speaker 8: because you know, if you look back to the eighteen
37:22
Speaker 8: sixties when zoodical Republicans were running the show and reconstruction
37:27
Speaker 8: was on their mind, and the Fourteenth Amendment came into play,
37:30
Speaker 8: as did the forerunner to the Fourteenth Amendment, the Civil
37:34
Speaker 8: Rights Act of eighteen sixty six. These laws were to
37:36
Speaker 8: push back on seven states which used vacancy walls, which
37:40
Speaker 8: were very similar right to what is that play here
37:42
Speaker 8: in the City of Grant Pass case, and basically track
37:45
Speaker 8: people either you know, working on certain plantations or working
37:49
Speaker 8: in certain conditions. And the pushback against that was that
37:51
Speaker 8: people should have freedom of movement. And you know, there
37:54
Speaker 8: were certainly people who also thought that there was a
37:56
Speaker 8: requirement and an obligation on government to provide some kind
38:00
Speaker 8: of basic social safety net. And this is a particularly
38:03
Speaker 8: important point that reconstruction legislators in South Carolina made in
38:08
Speaker 8: the late eighteen sixties and or only eighteen seventies. But
38:10
Speaker 8: there's no originalism here, right, There's kind of no originalism
38:13
Speaker 8: for folks who are poor. And I think that's really
38:15
Speaker 8: kind of telling in some respects about what this court
38:19
Speaker 8: is doing. It's not some kind of neutral zuri prudential
38:23
Speaker 8: decision making. They make decisions on an ad hoc basis,
38:26
Speaker 8: implementing whatever kind of constitutional tools of interpretation they want
38:30
Speaker 8: as they see fit. There's really no rhyme or reason
38:32
Speaker 8: to it other than they see an issue and they
38:35
Speaker 8: craft a rule based on what they viscerally and politically
38:39
Speaker 8: feel is the right outcome.
38:41
Speaker 1: Originalism being a method of interpreting the Constitution and laws
38:46
Speaker 1: that relies on history and tradition to determine its original meaning.
38:50
Speaker 1: Do you think that Grant's past case and several other
38:54
Speaker 1: cases exposed riffs among the conservatives about just what originalism is,
39:00
Speaker 1: especially the fractured decision in the Raheemi gun case where
39:04
Speaker 1: there were six concurrences basically debating originalism.
39:08
Speaker 8: I think the Raheimi case is really telling in some respects.
39:11
Speaker 8: It's ironic to me that Justice Schummas, who wrote the
39:15
Speaker 8: decision a couple of years ago in Bruin, which was
39:18
Speaker 8: this revolutionary Second Amendment case, basically was a loan to
39:22
Speaker 8: center in Rahimi and said, well, you don't really understand
39:25
Speaker 8: what I wrote. And so you know, that kind of
39:29
Speaker 8: undercuts the whole point of originalism. Right when you have
39:31
Speaker 8: the author of an opinion that received majority vote by
39:36
Speaker 8: members of the United States Supreme Court saying to other
39:39
Speaker 8: people in the Streme Court you don't understand just a
39:41
Speaker 8: couple of years later what I actually meant kind of
39:43
Speaker 8: ironically undercut originalism and its alleged integrity as a tool
39:48
Speaker 8: of interpretation. But I think the other thing is that
39:51
Speaker 8: it has shown some cracks in that people have understood
39:55
Speaker 8: that originalism has applied in a very strict and narrow
39:59
Speaker 8: sense unworkable and untenable outcome. And I think, frankly, the
40:04
Speaker 8: fact that the justices all roundly rejected this idea that
40:08
Speaker 8: the Second Amendment should somehow protect domestic abusers and allow
40:12
Speaker 8: them to have weapons. You know, most people in the
40:14
Speaker 8: United States, I think, would say they agree that that
40:16
Speaker 8: should not be the case. But if you applied just
40:19
Speaker 8: to Thomas's tests that he articulated a couple of years
40:22
Speaker 8: ago in a truly faithful way, the outcome would have
40:25
Speaker 8: been different. And so I think the Rasheini case, in
40:28
Speaker 8: some respects illustrates how there's this kind of roving attempt
40:34
Speaker 8: by a number of the members of the Court to
40:36
Speaker 8: apply riginalism where it works for them and to kind
40:39
Speaker 8: of push back a bit where it doesn't. And that, again,
40:42
Speaker 8: I think truly is astonishing for a group of people
40:47
Speaker 8: who suggest that originalism is the one, only and true
40:52
Speaker 8: way to interpret the Constitution.
40:54
Speaker 1: The Chief Justice used to care, or seemed to care
40:59
Speaker 1: about the public's of the court, about the Court as
41:02
Speaker 1: an institution, claiming, you know, justices are not politicians, that
41:07
Speaker 1: they're just calling balls and strikes. What do you think
41:10
Speaker 1: happened this term that he seemed to throw away that concern.
41:16
Speaker 8: That's a good question. I think for a long time,
41:20
Speaker 8: Justice Roberts was dealing with a court that was really
41:23
Speaker 8: straddling an ideological void a bit where any case could
41:27
Speaker 8: come out five to four. Really truly, before Donald Trump
41:31
Speaker 8: took office, you know, the Supreme Court was still incredibly conservative,
41:35
Speaker 8: even though it had a lot more ideological diversity on it.
41:39
Speaker 8: The Court was certainly right of center, and when Justice
41:42
Speaker 8: Kennedy left the bench a couple of years into Donald
41:44
Speaker 8: Trump's term, the Court went vastly right ward. But I
41:48
Speaker 8: think despite the Court's conservative dynamics before the Corom ministerration,
41:53
Speaker 8: John Roberts still had to cobble together coalition, and I
41:57
Speaker 8: think that there was a sense that the American public
41:59
Speaker 8: was coming increasingly liberal, especially on social issues and some
42:03
Speaker 8: of these kind of hot button issues that were very
42:05
Speaker 8: salient during the Aboma administration. I think there was a
42:09
Speaker 8: sense that he really had to keep together a coalition
42:11
Speaker 8: of five and so you know, there might be some
42:13
Speaker 8: internal fugitial politics at play there. It's really hard to say,
42:17
Speaker 8: but I think what we can for certain day is
42:20
Speaker 8: that he has seen, for whatever reason, the Court, you know,
42:23
Speaker 8: in his view, needs and can take a sharp turn.
42:26
Speaker 8: Right now, It's hard to understand without the perspective of
42:30
Speaker 8: more time exactly what's happened there, but there is I
42:34
Speaker 8: think a noticeable shift in the Chief justices perspective on
42:40
Speaker 8: the Court as an institution, in the institutional capital that
42:43
Speaker 8: it had. There are some risks to that. I think
42:45
Speaker 8: that opens up the Court to a lot more political text,
42:48
Speaker 8: so we'll have to see if that works out to
42:51
Speaker 8: his benefit.
42:51
Speaker 1: In the longer term, it's difficult to understand a lot
42:54
Speaker 1: of what's going on at the Court because of its
42:58
Speaker 1: total lack of transparency. Thanks so much, Anthony. That's Professor
43:02
Speaker 1: Anthony Michael Chrice of the Georgia State University College of Law.
43:06
Speaker 1: And that's it for this edition of the Bloomberg Law Podcast.
43:09
Speaker 1: Remember you can always get the latest legal news by
43:11
Speaker 1: subscribing and listening to the show on Apple Podcasts, Spotify,
43:16
Speaker 1: and at Bloomberg dot com, slash podcast, Slash Law. I'm
43:20
Speaker 1: June Grosso and this is Bloomberg