Latest / Bloomberg Law / Weekend Law: Climate Change, Retirement Funds & Trump's DC Makeover

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Weekend Law: Climate Change, Retirement Funds & Trump's DC Makeover · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
0:08
Speaker 2: The Supreme Court began its new term on Monday with
0:11
Speaker 2: a high-stakes climate case. A showdown of sorts in the
0:16
Speaker 2: climate change litigation going on across the country where dozens
0:20
Speaker 2: of cities and counties are trying to hold energy companies
0:24
Speaker 2: accountable for climate change with billions of dollars on the line.
0:29
Speaker 2: The city of Boulder, Colorado, is suing ExxonMobil and Suncor
0:33
Speaker 2: Energy under state law, saying they deceived the public about
0:37
Speaker 2: the risks of climate change while contributing to the problem
0:41
Speaker 2: by producing fossil fuels. But the oil companies say climate
0:46
Speaker 2: change is a global phenomenon that can't be litigated in
0:50
Speaker 2: state courts. Conservative Justice Brett Kavanaugh agreed with the oil companies...
0:55
Speaker 2: and was insistent that this kind of pollution is a
0:59
Speaker 2: matter for federal law.
1:01
Speaker 3: This court has said four times that interstate air and
1:04
Speaker 3: water pollution are matters for federal law unless Congress preserves or,
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Speaker 3: in Mr. Shanmugam's words, authorizes state law. Doesn't that take
1:15
Speaker 3: care of the issue?
1:17
Speaker 2: But Chief Justice John Roberts said the court has long
1:21
Speaker 2: allowed similar lawsuits over out-of-state activities that have an in-state effect,
1:27
Speaker 2: like mass torts.
1:28
Speaker 4: Precisely what's going on here, conduct that could have impacts
1:31
Speaker 4: in many states, all of the states. We still allow,
1:36
Speaker 4: in many of these situations, people to file in their
1:39
Speaker 4: state to seek relief from injuries that are occurring in
1:44
Speaker 4: their state.
1:44
Speaker 2: Although Roberts expressed concerns about a deluge of new suits
1:49
Speaker 2: against the energy industry if Boulder wins.
1:52
Speaker 4: Presumably, if you prevail... the next day, a municipality in
1:58
Speaker 4: every single state will file a lawsuit, probably copy your pleadings.
2:03
Speaker 2: While liberal Justice Katonji Brown Jackson suggested that the court
2:07
Speaker 2: shouldn't even be exercising its jurisdiction so early in the case,
2:12
Speaker 2: when the Colorado Supreme Court hasn't addressed other arguments the
2:16
Speaker 2: companies are making to dismiss the lawsuit.
2:19
Speaker 5: I wonder whether we should be considering matters like this
2:23
Speaker 5: essentially piecemeal insofar as you've not only made this preemption argument,
2:29
Speaker 5: I understand that you have several other federal issues that
2:33
Speaker 5: you have raised that are still pending in the state court.
2:37
Speaker 5: So why shouldn't we wait and hear all of these
2:41
Speaker 5: claims once the state courts are done with their federal considerations?
2:46
Speaker 2: The justices sent plenty of mixed signals during the nearly
2:49
Speaker 2: two hours of oral arguments. Joining me is an expert
2:53
Speaker 2: in environmental law, Pat Parenteau, a professor at the Vermont
2:56
Speaker 2: Law and Graduate School. Pat, what are the stakes in
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Speaker 2: this case?
3:01
Speaker 6: Well, what's at stake are billions of dollars that would
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Speaker 6: go towards climate adaptation and all these communities that are
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Speaker 6: being hammered by runaway, frankly, climate disruption, floods and fires
3:12
Speaker 6: and droughts.
3:13
Speaker 7: Oh, my.
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Speaker 6: So That's what the county and city of Boulder are
3:18
Speaker 6: seeking is a contribution from the oil companies whose products
3:22
Speaker 6: are responsible for this damage and also responsible for the
3:28
Speaker 6: deception around what they knew about climate change and what
3:32
Speaker 6: they did about it and so forth. So, you know,
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Speaker 6: it's a money case, and the court was well aware
3:39
Speaker 6: that billions of dollars are at issue. Bankruptcy might be
3:42
Speaker 6: at issue. That came up in the argument. So it's
3:45
Speaker 6: a dollars case, but big dollars.
3:48
Speaker 2: One of the main focuses was whether federal law blocked
3:52
Speaker 2: these types of lawsuits, and a lot of the justices'
3:55
Speaker 2: questions focused on that.
3:57
Speaker 8: Yeah.
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Speaker 6: And what was interesting is the company's arguments have flipped.
4:03
Speaker 6: For a long time, the companies were arguing the Clean
4:06
Speaker 6: Air Act preempts these state-based claims. Now they're arguing, no, no,
4:13
Speaker 6: it's actually the Constitution itself, the structure of the Constitution,
4:18
Speaker 6: they say, that preempts not only these lawsuits, but any
4:24
Speaker 6: state tort lawsuit. based on pollution. So most of the
4:29
Speaker 6: argument focused on pollution, on emissions.
4:33
Speaker 2: The oil companies argue that climate change is a global
4:37
Speaker 2: phenomenon that doesn't lend itself to state-by-state litigation the way
4:43
Speaker 2: fights over local pollution do. But Colorado comes back and
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Speaker 2: says we're not trying to control emissions.
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Speaker 6: The nuisance claims that are in the case are probably
4:56
Speaker 6: most at risk. I would certainly acknowledge that because they
4:59
Speaker 6: do implicate directly, more directly, emissions. They're basically saying your
5:05
Speaker 6: products are an unreasonable interference with the environment in Colorado, right?
5:12
Speaker 6: So that's somewhat problematic. But what isn't problematic is that
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Speaker 6: the Clean Air Act and no federal law regulates consumer fraud.
5:22
Speaker 6: In the way that Colorado does, that's a traditional state function.
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Speaker 6: And frankly, the advocate for Boulder, I thought, did a
5:32
Speaker 6: very poor job of emphasizing that the core of these
5:37
Speaker 6: cases is deception. It's lying.
5:40
Speaker 9: It's fraud.
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Speaker 6: That's the tortious activity. That's what Colorado law is being
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Speaker 6: used to assign liability for actions that took place in
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Speaker 6: Colorado by these companies with damages in Colorado. And so
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Speaker 6: the fact that the court didn't really tease out whether
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Speaker 6: this isn't truly a case about just emissions or is
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Speaker 6: it really a case about the company's conduct in Colorado.
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Speaker 6: That got lost, I'm afraid, in the welter of issues
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Speaker 6: that were flying around. There was so much interruption of
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Speaker 6: question and answer that it was almost impossible to follow
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Speaker 6: the flow, if there was one, to the argument. Although
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Speaker 6: I thought of late, the court was more disciplined in
6:28
Speaker 6: allowing questions to get answered and then go to the
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Speaker 6: next one. This one was a jumble, frankly.
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Speaker 2: I agree with the jumble analysis. Most of them asked
6:37
Speaker 2: tough questions of both sides, gave off mixed signals. Could
6:42
Speaker 2: you read the position of any of the justices?
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Speaker 6: We can certainly tell where Justice Kavanaugh is coming down.
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Speaker 6: Six times he interrupted or either asked questions or followed
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Speaker 6: up with other questions in which he clearly signaled he's
6:57
Speaker 6: voting for the oil companies. He sees this as a
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Speaker 6: pollution case. He didn't even reference the consumer angle to
7:04
Speaker 6: the case much at all, if at all. And he
7:06
Speaker 6: thinks it's controlled by four Supreme Court precedents, which he
7:10
Speaker 6: talked about ad nauseum. The Milwaukee One case, which is
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Speaker 6: a Clean Water Act case way back in the.
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Speaker 9: 1980s, actually.
7:17
Speaker 6: And then the Ouellette case, which got a lot of attention.
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Speaker 6: That's another Clean Water Act case that deals with this
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Speaker 6: savings provision that exists in both the Clean Water Act
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Speaker 6: and the Clean Air Act. And so there was a
7:30
Speaker 6: lot of discussion with Kavanaugh around, isn't this just an
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Speaker 6: example of interstate, indeed global pollution, which is the province,
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Speaker 6: as he said, of Congress, of the federal government, not
7:43
Speaker 6: the states. He did acknowledge that in the Ouellette case,
7:46
Speaker 6: you know, the Supreme Court did say that source state
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Speaker 6: of pollution is not preempted, but affected state law is preempted.
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Speaker 6: and he likened Colorado to Vermont, which was the state
8:02
Speaker 6: involved in the Ouellette case, and said, isn't Colorado just
8:06
Speaker 6: like Vermont, and therefore Colorado's law is preempted? He got
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Speaker 6: a positive response from Mr. Russell at that point. I
8:14
Speaker 6: think he should have been more guarded in the way
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Speaker 6: he answered. That was a trap question, and he didn't
8:19
Speaker 6: handle it very well. He just readily conceded that Yeah,
8:22
Speaker 6: Colorado's law is preempted. What he should have said, but
8:25
Speaker 6: not Colorado's consumer protection law, which is what this case
8:28
Speaker 6: is about. So missed opportunities, I would say.
8:32
Speaker 2: What about the other justices who were less emphatic?
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Speaker 6: You know, Kagan was also asking hard questions of both sides.
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Speaker 6: So hard to read. Sotomayor's pretty clearly reading in favor
8:45
Speaker 6: of Boulder. Justice Jackson, I would say, is probably pretty
8:48
Speaker 6: clearly in favor of Boulder. When it comes to Roberts
8:51
Speaker 6: and Barrett and even Gorsuch, harder to figure out. They
8:55
Speaker 6: asked a lot of different questions, probing different theories. So,
9:00
Speaker 6: you know, it's still impossible to read how this is
9:03
Speaker 6: going to come down.
9:04
Speaker 2: Colorado does have an advantage here that we haven't talked
9:07
Speaker 2: about yet. Justice Samuel Alito recused himself from the case
9:11
Speaker 2: because he owned stock in oil companies that could be
9:15
Speaker 2: affected by the decision. So there are only eight justices sitting.
9:19
Speaker 2: That opens the possibility of a 4-4 split, which would
9:23
Speaker 2: leave in place the lower court decision allowing the suit
9:27
Speaker 2: to go forward.
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Speaker 6: That's a really important point. So, you know, 4-4 and
9:32
Speaker 6: Boulder wins. And I can see a 4-4 here. I
9:35
Speaker 6: can actually see that. I can also see the court
9:38
Speaker 6: backing up on the jurisdictional question. That came up a
9:41
Speaker 6: number of times. You know, that's a hyper-technical question of
9:45
Speaker 6: whether what the Colorado Supreme Court did Was an original
9:50
Speaker 6: action in the Colorado Supreme Court, which is what the
9:54
Speaker 6: oil companies are arguing, or was it simply an appeal
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Speaker 6: of the lower courts ruling, denying a motion to dismiss?
10:02
Speaker 6: So there is a really hyper-technical question. Does the Supreme
10:06
Speaker 6: Court actually have jurisdiction in this case? But there's enough
10:10
Speaker 6: ambiguity in that for the court to say, you know what?
10:13
Speaker 6: We're not going to reach a really thorny constitutional question
10:18
Speaker 6: with huge implications for state law on this kind of
10:23
Speaker 6: a record. It came up repeatedly. that the companies still
10:27
Speaker 6: have a bunch of defenses. You know, nobody's actually won
10:30
Speaker 6: a judgment against them yet, and they may never will
10:34
Speaker 6: because there are very serious causation challenges. There's personal jurisdiction
10:39
Speaker 6: defenses and so forth. So, you know, it may well
10:43
Speaker 6: be that cooler heads prevail and they say, you know what,
10:46
Speaker 6: we don't have to decide this right now. I know
10:49
Speaker 6: the companies are complaining about having spent all this money
10:52
Speaker 6: on their lawyers. We've never used that as a reason
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Speaker 6: to reach constitutional issues like this. So maybe the court
11:00
Speaker 6: will come to its senses, in my view, and say,
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Speaker 6: let's hold our hand on this.
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Speaker 2: And I thought Justice Jackson made a good argument for
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Speaker 2: the court not intervening at this point when there are
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Speaker 2: so many issues left to be decided.
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Speaker 6: I mean, the point is, why jump in now? when
11:16
Speaker 6: the companies may win these cases. So, you know, all
11:20
Speaker 6: this talk about bankruptcy and a floodgate of other lawsuits
11:24
Speaker 6: and so on and so forth. Yeah, well, maybe. But
11:29
Speaker 6: we don't rule on maybe in the Supreme Court.
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Speaker 2: They really started off the term with a bang. Thanks
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Speaker 2: so much, Pat. That's Professor Pat Parenteau of the Vermont
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Speaker 2: Law and Graduate School. Coming up next on the Bloomberg
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Speaker 2: Law Show. the justices consider lawsuits over investment choices made
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Speaker 2: for retirement funds. I'm June Grosso, and you're listening to Bloomberg.
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Speaker 3: But do you agree with the general principle that when
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Speaker 3: we're limited to underperformance claims, a benchmark of some kind,
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Speaker 3: a meaningful benchmark of some kind is required? Apples, not oranges.
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Speaker 2: There aren't many Supreme Court oral arguments where it seems
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Speaker 2: like the justices are on the same page. But Tuesday's
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Speaker 2: arguments on when an employee can sue an employer over
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Speaker 2: risky investments on the company's retirement plan was the exception.
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Speaker 2: Employees of Intel say the company violated its fiduciary duty
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Speaker 2: by putting retirement funds in, quote, costly and illiquid investments
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Speaker 2: like hedge funds and private equity. The question is whether
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Speaker 2: the suit can go forward without the employees showing a
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Speaker 2: comparison to better-performing funds with similar goals. The Ninth Circuit
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Speaker 2: said no and dismissed the employees' suit, and it appears
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Speaker 2: the result will be the same at the Supreme Court,
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Speaker 2: where the justices used fruit metaphors to illustrate the need
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Speaker 2: for a meaningful benchmark standard.
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Speaker 7: I think what the Ninth Circuit is saying is you
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Speaker 7: can't compare apples and oranges. If you have a fund,
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Speaker 7: an equity fund, that is designed to produce high returns
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Speaker 7: but riskier returns, and you can't compare that to a
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Speaker 7: fund that is to protect against losses.
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Speaker 9: The thing that you need in addition is like another apple. Now,
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Speaker 9: I understand it when you say it doesn't have to
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Speaker 9: be like precisely the same apple with precisely the same
13:31
Speaker 9: color and texture and taste and all of that, but
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Speaker 9: it's got to be kind of an apple.
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Speaker 7: What kind of apple is it?
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Speaker 8: Don't you have to do that to decide if an
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Speaker 8: apple is an apple? Don't you have to say, well,
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Speaker 8: it has to be round. You know, it has to
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Speaker 8: come from a certain kind of tree. I mean, it
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Speaker 8: seems to me that really you are agreeing that a
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Speaker 8: meaningful benchmark standard is appropriate. You're fighting a little bit
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Speaker 8: about what is meaningful, right?
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Speaker 2: The only real question appeared to be how to write
14:01
Speaker 2: the opinion, how much guidance the justices should give the
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Speaker 2: lower courts on what a meaningful benchmark standard looks like.
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Speaker 2: Justice Elena Kagan, at least, favored crafting an opinion that
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Speaker 2: would help the lower courts.
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Speaker 9: So we could do something useful here, couldn't we, by saying, yeah,
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Speaker 9: it needs to be meaningfully similar. That doesn't mean identical.
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Speaker 9: Here are the kinds of things that you look to.
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Speaker 9: The kinds of things are actually the kinds of things
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Speaker 9: that you talk about in your brief and even more
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Speaker 9: the SG talks about in its brief.
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Speaker 2: Might it even turn out to be a unanimous decision?
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Speaker 2: Joining me is Erica Rozo, a partner at Simpson Thatcher. Erica,
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Speaker 2: give us an overview of the case.
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Speaker 1: When we talk about the case, I think it's first
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Speaker 1: important to talk about how we got here. So historically,
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Speaker 1: Americans have saved for retirement through defined benefit pension plans,
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Speaker 1: and these pension plans invested a material portion of their
14:56
Speaker 1: assets in the private markets. Today, however, Most Americans save
15:00
Speaker 1: for retirement through 401k plans. 401k plan participants have not
15:05
Speaker 1: to date had material access to private markets. One of
15:09
Speaker 1: the reasons for that is that 401k plan fiduciaries are
15:12
Speaker 1: often sued when they select an investment option other than
15:15
Speaker 1: a traditional target date fund that invests primarily in public markets.
15:18
Speaker 1: So while this case is one piece of a larger
15:22
Speaker 1: movement to provide equal access to the U.S. economy, it
15:25
Speaker 1: is narrow. The case is not importantly about whether alternative
15:29
Speaker 1: assets or private markets are appropriate for 401k plans generally.
15:33
Speaker 10: The Supreme Court in.
15:34
Speaker 1: This case is very focused on the particular issue asked.
15:38
Speaker 1: which is whether a plaintiff must show a meaningful benchmark
15:42
Speaker 1: when alleging imprudence premised on underperformance. That means when a
15:48
Speaker 1: 401k plan fiduciary chooses an investment option and puts it
15:52
Speaker 1: on the 401k plan menu and they are sued for
15:55
Speaker 1: doing so, and the suit alleges that that investment option
15:59
Speaker 1: was imprudent because it underperforms, can they show a traditional
16:03
Speaker 1: target date fund that happened to perform better or must
16:06
Speaker 1: they show a similar benchmark.
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Speaker 2: So the plaintiffs here, the Intel employees, are they asking
16:14
Speaker 2: the court to reject completely the meaningful benchmark standard?
16:18
Speaker 10: That's right.
16:19
Speaker 6: Yes.
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Speaker 1: So the plaintiff's argument is that ERISA requires a holistic
16:25
Speaker 1: review of an investment decision. So they think that by
16:29
Speaker 1: having a meaningful benchmark standard, that it takes away from
16:33
Speaker 1: the holistic view of prudence that ERISA has decided to protect.
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Speaker 2: So the Intel employees are accusing the company of violating
16:41
Speaker 2: its fiduciary duty. How so? What do they say it
16:44
Speaker 2: did or didn't do?
16:46
Speaker 1: So what they are alleging is that it was imprudent
16:48
Speaker 1: to put this investment option on the 401k plan lineup.
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Speaker 1: What we know under ERISA is that prudence is a
16:56
Speaker 1: process-based requirement. So what it requires is that a planned
16:59
Speaker 1: fiduciary follow a prudent process when making an investment decision
17:03
Speaker 1: or when selecting an investment option for a 401k plan menu.
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Speaker 1: It does not require a planned fiduciary to have a
17:10
Speaker 1: crystal ball. So the courts are very clear that prudence
17:14
Speaker 1: is not judged by the performance of an investment option,
17:17
Speaker 1: but rather the prudent process. Here, however, the plaintiffs are
17:21
Speaker 1: premising their claim on the fact that the investment option
17:25
Speaker 1: did underperform during the relevant period.
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Speaker 2: Did it seem like there wasn't much disagreement among the
17:31
Speaker 2: justices about whether to require meaningful benchmarks?
17:35
Speaker 1: You know, the justices seem to be very focused on
17:39
Speaker 1: when to apply a meaningful benchmark standard rather than if
17:43
Speaker 1: to apply a meaningful benchmark standard. It seemed that there
17:46
Speaker 1: was agreement that not all claims of imprudence would require
17:51
Speaker 1: a meaningful benchmark. For instance, when there was a claim
17:56
Speaker 1: of imprudence because the strategy of an investment option was imprudent,
18:01
Speaker 1: that would not require a meaningful benchmark. But rather, when
18:04
Speaker 1: there was a claim that an investment option was imprudent
18:09
Speaker 1: and that premise was based on performance, as it was
18:12
Speaker 1: in this case, then that may be a situation where
18:16
Speaker 1: a meaningful benchmark is required. And then there was also
18:19
Speaker 1: discussion of the extent to which a Supreme Court should
18:23
Speaker 1: opine on what a meaningful benchmark looks like.
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Speaker 2: So you had Justice Gorsuch saying, you know, here's the
18:30
Speaker 2: question we're supposed to answer. But you had Justice Kagan
18:34
Speaker 2: saying we could do something useful here by telling the
18:37
Speaker 2: lower courts, here are the kinds of things you look
18:39
Speaker 2: at when making this determination. Can you tell which of
18:43
Speaker 2: the justices seem to agree with Kagan?
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Speaker 1: You know, I couldn't tell exactly where all the justices
18:49
Speaker 1: fell on that point, but it did seem that most
18:52
Speaker 1: of the discussion was focused on the extent to which
18:56
Speaker 1: the Supreme Court should opine on what meaningful is in
18:58
Speaker 1: this context.
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Speaker 2: So then the only real question is whether they're going
19:02
Speaker 2: to write a narrow decision or one that gives the
19:06
Speaker 2: lower courts guidance.
19:08
Speaker 1: I think that it was very clear that the Supreme
19:10
Speaker 1: Court intends for this to be a narrowly focused decision.
19:15
Speaker 1: You saw several times where the justices dismissed the attempt
19:19
Speaker 1: to make this a broader case about whether alternative assets
19:22
Speaker 1: are appropriate or whether the private markets are appropriate for
19:25
Speaker 1: 401k plans generally. And they were really focused on whether
19:28
Speaker 1: a meaningful benchmark was required in cases alleging imprudence based
19:33
Speaker 1: on performance. So I do think it will be a
19:36
Speaker 1: narrow case. I think something to watch is whether the
19:39
Speaker 1: Supreme Court decides to opine on what meaningful means in
19:44
Speaker 1: this context or whether they defer to the lower courts.
19:47
Speaker 2: How difficult does it make these class action lawsuits if
19:51
Speaker 2: they have to allege a meaningful benchmark?
19:55
Speaker 1: I think it is not a question of whether or
19:58
Speaker 1: not it will be more difficult. It's a question of
20:02
Speaker 1: how similar a meaningful benchmark might be. For instance, What
20:07
Speaker 1: factors do they have to hold constant when.
20:11
Speaker 10: Suggesting a meaningful benchmark?
20:13
Speaker 1: It may make sense to hold the strategy constant when
20:18
Speaker 1: suggesting a meaningful benchmark, but the court could opine that
20:21
Speaker 1: other factors are relevant as well.
20:23
Speaker 2: So if they don't answer this question, how much will
20:26
Speaker 2: this decision help? Will the case or a similar case
20:29
Speaker 2: end up coming back to the Supreme Court for more guidance?
20:34
Speaker 1: Regardless of how the court comes out, I think the
20:36
Speaker 1: case will be helpful just, again, to protect fiduciaries who
20:42
Speaker 1: are deciding to select an investment option that may be
20:45
Speaker 1: a little less traditional than your off-the-shelf target date funds
20:49
Speaker 1: that invest primarily in public markets. It will be helpful
20:53
Speaker 1: in giving those planned fiduciaries confidence that they are able
20:56
Speaker 1: to defend meritless claims of imprudence.
21:01
Speaker 2: How important will this decision be as far as efforts
21:06
Speaker 2: to put alternative assets, such as private equity and hedge funds,
21:11
Speaker 2: into defined contribution retirement plans?
21:15
Speaker 10: Well, I think that's a great point.
21:17
Speaker 1: I think regardless of how the Supreme Court rules on
21:20
Speaker 1: this case, the initiative to democratize access to private markets
21:24
Speaker 1: for 401k plans.
21:25
Speaker 10: Has significant momentum.
21:27
Speaker 1: At this point, it's really not whether 401k plan participants
21:31
Speaker 1: will have access to private markets, but when and how.
21:34
Speaker 1: If the Supreme Court rules in favor of Intel, that
21:38
Speaker 1: will be an added piece of momentum to the movement.
21:41
Speaker 1: If the Supreme Court does not rule in favor of Intel, that.
21:45
Speaker 10: Will be maybe a bump in the road.
21:48
Speaker 1: But as I said, the movement has significant momentum, and
21:51
Speaker 1: I don't see it stopping.
21:53
Speaker 2: And I read that there's been a steep rise in
21:56
Speaker 2: class action lawsuits under ERISA this year.
21:59
Speaker 1: I don't know the exact numbers for 2026. But what
22:03
Speaker 1: I do know is that the perception by planned fiduciaries
22:08
Speaker 1: is that that there is a real fear of being
22:11
Speaker 1: sued when they pick an investment option that is something
22:14
Speaker 1: other than the traditional off-the-shelf target date fund that invests
22:17
Speaker 1: primarily in public markets. Whether or not the numbers actually
22:21
Speaker 1: show that in 2026, I'm not sure, but I do
22:23
Speaker 1: know that that perception remains very strong.
22:26
Speaker 2: What kind of lawsuits do 401k fiduciaries face in general?
22:32
Speaker 1: 401k plan fiduciaries are sued quite often. For a variety
22:38
Speaker 1: of reasons, but it is often based on underperformance of
22:41
Speaker 1: a particular investment option or a claim that the fees
22:46
Speaker 1: were higher than they should have been for a particular
22:48
Speaker 1: investment option.
22:49
Speaker 10: Those are very common lawsuits.
22:52
Speaker 2: And what are the implications, the broad implications of a
22:55
Speaker 2: decision in this case?
22:56
Speaker 10: The outcome of this.
22:57
Speaker 1: Case is not going to impact a plan fiduciary's duty
23:00
Speaker 1: of prudence when selecting investment options for 401k plans. And
23:04
Speaker 1: ERISA plan fiduciaries' duties are widely described by the courts
23:07
Speaker 1: as the highest known to law, and that is not
23:10
Speaker 1: going to change. What the outcome of this case may
23:13
Speaker 1: impact is the ability of a prudent fiduciary to defend
23:16
Speaker 1: itself against meritless claims.
23:18
Speaker 2: We'll find out the decision by June the latest, probably
23:22
Speaker 2: before in this case. Thanks so much, Erica. That's Erica
23:26
Speaker 2: Rosso of Simpson Thatcher, coming up next on the Bloomberg
23:30
Speaker 2: Law Show. President Trump's name is affixed in large silver
23:34
Speaker 2: letters on the Institute of Peace's building in D.C., but
23:38
Speaker 2: a federal appellate court says Trump cannot have his name
23:42
Speaker 2: carved into the building. It's just one of the many
23:45
Speaker 2: cases that federal district courts and appellate courts are handling
23:50
Speaker 2: over Trump's efforts to put his stamp on the nation's capital.
23:54
Speaker 2: I'm June Grosso, and this is Bloomberg. In December of
23:59
Speaker 2: last year, the State Department announced that it was renaming
24:03
Speaker 2: the U.S. Institute of Peace the Donald J. Trump Institute
24:08
Speaker 2: of Peace to, quote, reflect the greatest dealmaker in our
24:12
Speaker 2: nation's history. Of course, Trump's name was affixed in large
24:16
Speaker 2: silver letters to the Institute's headquarters building in D.C., right
24:21
Speaker 2: ahead of a peace agreement signing ceremony between Rwanda and
24:25
Speaker 2: the Democratic Republic of Congo, hosted by Trump.
24:29
Speaker 6: I want to thank the leaders.
24:30
Speaker 9: I want to thank you very much.
24:32
Speaker 4: It means maybe more because we are here together for
24:36
Speaker 4: the first time ever in this building.
24:38
Speaker 5: Brand new, beautiful building.
24:40
Speaker 9: I don't want to tell you how much it costs
24:41
Speaker 9: because I hear.
24:42
Speaker 4: It's a lot.
24:43
Speaker 2: The irony is that the renaming came as the Trump
24:46
Speaker 2: administration was waging a months-long battle to gut the institute,
24:51
Speaker 2: firing most of the board as well as much of
24:54
Speaker 2: its staff and leading to a legal dispute that's ongoing.
24:58
Speaker 2: And now, just 10 months later, apparently the large silver
25:02
Speaker 2: letters are not enough. Trump wants his name actually carved
25:07
Speaker 2: into the facade of the building. but a divided appeals
25:10
Speaker 2: court has said no. Joining me is Bloomberg Law reporter
25:14
Speaker 2: Suzanne Moniak, who's been covering all the cases involving Trump's
25:18
Speaker 2: attempts to put his stamp on Washington, D.C. So, Suzanne,
25:23
Speaker 2: Trump's name is bolted to the front of the Institute's building.
25:28
Speaker 2: Tell us about this dispute over having his name actually
25:32
Speaker 2: carved into the building.
25:33
Speaker 10: The U.S.
25:34
Speaker 11: Institute of Peace had come to a federal appeals court
25:37
Speaker 11: and told them that They had essentially received information that
25:41
Speaker 11: that was in the works, that a contractor had been
25:43
Speaker 11: selected and that Trump was looking to carve his name
25:45
Speaker 11: on the outside of the building.
25:46
Speaker 10: Of course, his name is already on the building and
25:48
Speaker 10: external lettering.
25:49
Speaker 11: This is an institution that's been fighting for its life
25:52
Speaker 11: against this administration's attempt at dismantling. This latest issue came
25:56
Speaker 11: to the court recently and the appeals court told the administration, no,
25:59
Speaker 11: you cannot carve your name on the building. For what
26:02
Speaker 11: it's worth, the administration claimed there were no current plans
26:04
Speaker 11: to do so.
26:05
Speaker 10: But it did admit that it had explored the option.
26:07
Speaker 2: It's stunning that he wants to carve his name into
26:09
Speaker 2: a building when he's been trying to dismantle the Institute
26:13
Speaker 2: of Peace since, what, the beginning of his administration?
26:17
Speaker 10: That's right.
26:18
Speaker 11: There have been widespread federal worker firings at the Institute,
26:22
Speaker 11: and that's a lot of what's been at stake in
26:23
Speaker 11: the broader case. Some of those were led by DOGE,
26:26
Speaker 11: the Elon Musk-led unit of government efficiency that resulted in
26:29
Speaker 11: federal workforce cuts really across the government. So a lot
26:32
Speaker 11: of that is still an issue in the Institute of Peace.
26:34
Speaker 11: We almost saw a little bit of a side issue
26:36
Speaker 11: that came up in that case that was brought actually
26:38
Speaker 11: at the appeals court level where we saw the Institute
26:41
Speaker 11: come to the appeals court and say, hey, I know
26:42
Speaker 11: this case is already pending. The appeals court has lifted
26:45
Speaker 11: lower court orders that had blocked the cuts. So those
26:48
Speaker 11: cuts have been allowed to continue. But the Institute said, hey,
26:51
Speaker 11: the status quo has actually changed a little bit.
26:53
Speaker 10: Like, I know you said the.
26:54
Speaker 11: Lower court order blocking the dismantling was going to be
26:56
Speaker 11: lifted while litigation progresses. But the administration's taken this a
27:00
Speaker 11: step further and they're going to do something permanent that
27:03
Speaker 11: we won't be able to undo if it's allowed to happen.
27:06
Speaker 11: The Institute even made a point of saying to the court, hey,
27:08
Speaker 11: we didn't come to you when it was just external lettering.
27:11
Speaker 10: But now we're hearing that it might be carving. So
27:13
Speaker 10: we're asking for you to step in.
27:14
Speaker 11: So in that case, we actually saw a split panel
27:16
Speaker 11: for the appeals court agree with the Institute of Peace
27:18
Speaker 11: there and say, no, you can't.
27:20
Speaker 10: Carve your name.
27:21
Speaker 11: So essentially, they unlifted part of a lower court order
27:24
Speaker 11: that blocked the administration from making that kind of change.
27:27
Speaker 2: Maybe I shouldn't be, but I'm surprised that it was
27:29
Speaker 2: a two to one decision. You had a Barack Obama
27:32
Speaker 2: appointee and a Jimmy Carter appointee in the majority and
27:35
Speaker 2: a George H.W. Bush appointee in the minority. So do
27:39
Speaker 2: we know why that judge would have let him carve
27:42
Speaker 2: his name into the building?
27:44
Speaker 11: As you mentioned, it was an ideological split to Democratic
27:46
Speaker 11: appointees comprised the majority that blocked the potential efforts.
27:50
Speaker 10: And yes, a Republican appointee dissented.
27:52
Speaker 11: There was no dissent attached to the order, just a
27:55
Speaker 11: one page order with the outcome. That was Judge Karen Henderson,
27:57
Speaker 11: who said that she would have ruled otherwise. We don't
28:00
Speaker 11: know her reasoning because she didn't write separately on it.
28:03
Speaker 2: Did a district court judge ever rule on this or
28:05
Speaker 2: was it straight to the appeals court?
28:07
Speaker 11: Somewhat straight to the appeals court. It was a little
28:08
Speaker 11: bit wonky procedurally. The lower court judge had ruled on
28:11
Speaker 11: broader dismantling of the U.S. Institute of Peace when it
28:14
Speaker 11: came to workforce cuts and those types of issues. Then
28:16
Speaker 11: at the appellate stage, they said, hey, something.
28:18
Speaker 10: New has come up.
28:19
Speaker 11: So that's a little bit different procedurally than we see
28:22
Speaker 11: a lot of the time. And in this case, the
28:23
Speaker 11: appeals court did decide to block it. It was a
28:26
Speaker 11: little bit of a weird stage in the case to
28:28
Speaker 11: have something like this come up.
28:29
Speaker 2: I mean, this sort of went under the radar.
28:31
Speaker 10: Perhaps the U.S.
28:32
Speaker 11: Institute of Peace is just a smaller, more under-the-radar institution.
28:35
Speaker 11: They're an independent entity created by Congress in the 80s
28:37
Speaker 11: to help the government, you know, resolve or mitigate violent
28:40
Speaker 11: conflict abroad.
28:42
Speaker 10: So perhaps that is just a more narrow mission.
28:44
Speaker 11: Allies have really a bit more, as you alluded, been
28:46
Speaker 11: on the Kennedy Center, which is the other building that
28:49
Speaker 11: Trump is trying to put his name on.
28:50
Speaker 10: And I think that one's been capturing more headlines.
28:53
Speaker 2: Yes, a lot of litigation over the Kennedy Center. Tell
28:56
Speaker 2: us where that stands.
28:58
Speaker 11: So that case has been moving almost in parallel in
29:00
Speaker 11: both the lower court and appeals courts. Essentially, the Kennedy
29:04
Speaker 11: Center's Board of Trustees, which is chaired by Donald Trump,
29:07
Speaker 11: has been blocked by federal courts from putting Trump's name
29:10
Speaker 11: on the building, either by fully renaming it for him
29:13
Speaker 11: or by somehow acknowledging his contributions to the center.
29:16
Speaker 10: They've also been blocked from renaming Plaza, the Donald J.
29:19
Speaker 11: Trump Plaza, like the grounds of the institution in So
29:22
Speaker 11: just a couple of different attempts that the board tried
29:24
Speaker 11: to make to get Trump's name on there somehow all
29:27
Speaker 11: have been blocked.
29:28
Speaker 10: The lower court judge in that case, Judge Casey Cooper, has.
29:31
Speaker 11: Also temporarily blocked the center from closing for a two-year
29:34
Speaker 11: renovation until the board considers more information. The board has
29:38
Speaker 11: voted again, claiming that they did consider more information to
29:41
Speaker 11: close it, and those proceedings are still ongoing.
29:44
Speaker 10: But what's a little weird in this.
29:45
Speaker 11: Case is that the Kennedy Center is nonetheless closed under
29:48
Speaker 11: what its executive director has said is a temporary week-by-week
29:51
Speaker 11: closure that is separate from the board-voted two-year closure out
29:55
Speaker 11: of stated safety concerns for the building. So at the
29:58
Speaker 11: lower court, we're seeing regular status reports from the Kennedy
30:01
Speaker 11: Center's executive director about whether that weekly closure is getting renewed. Meanwhile,
30:06
Speaker 11: the federal government, the Justice Department, is appealing the order
30:09
Speaker 11: that had blocked the renaming. They're arguing at the appeals
30:12
Speaker 11: court that the Kennedy Center's building.
30:14
Speaker 10: Will physically or financially or.
30:16
Speaker 11: Both collapse unless the board is able to recognize the
30:19
Speaker 11: Trump's name on the building.
30:21
Speaker 10: They're touting him as a renowned.
30:23
Speaker 11: Real estate developer whose contributions are absolutely needed to save
30:27
Speaker 11: this center from decline.
30:29
Speaker 2: The decline in the Kennedy Center seems to have started
30:32
Speaker 2: when Trump took over, although that issue is being litigated.
30:36
Speaker 2: Trump has talked about the Kennedy Center being demolished, but
30:40
Speaker 2: the context isn't clear to me. Here's one of the
30:43
Speaker 2: things he said about that last month.
30:46
Speaker 7: I think that the Trump administration's Should certainly have recognition,
30:50
Speaker 7: because frankly, if we don't do that, it's going to close.
30:54
Speaker 6: It'll end up being ripped down. It's in very, very
30:56
Speaker 6: bad shape.
30:57
Speaker 2: Is he talking about it being demolished because they're not
31:00
Speaker 2: putting his name on the building or being demolished because
31:04
Speaker 2: it's allegedly in such disrepair?
31:07
Speaker 10: Perhaps the confusion is deliberate.
31:09
Speaker 11: Many lovers of the Kennedy Center have been concerned by
31:13
Speaker 11: some of the allusions made by this administration to the
31:16
Speaker 11: prospect of demolishing the Kennedy Center. We saw that in
31:20
Speaker 11: a court filing where they suggested this were to go
31:22
Speaker 11: under if we can't put his name on the building.
31:24
Speaker 11: They've essentially suggested that President Donald Trump would not step
31:27
Speaker 11: in to help the Kennedy Center, though he is chair
31:29
Speaker 11: of the board, unless he can be properly recognized. So
31:32
Speaker 11: they're saying, oh, well, if that's the case, then this
31:34
Speaker 11: is going to go under financially, and perhaps we would
31:36
Speaker 11: demolish it and replace it with an amphitheater. That was
31:39
Speaker 11: a suggestion in a court filing. It was also a
31:41
Speaker 11: bit of public consternation after a photograph appeared on news
31:44
Speaker 11: wires of President Donald Trump holding what appeared to be
31:47
Speaker 11: like a newspaper that said Kennedy Center demolished or something
31:51
Speaker 11: similar to that. And that had created some public concern, like, oh,
31:55
Speaker 11: is this something he's considering actually doing and is thinking
31:58
Speaker 11: about what that headline would look like? And yes, we
32:00
Speaker 11: saw in the most recent opening brief at the appeals court,
32:02
Speaker 11: the government straight up said that the center, you know,
32:05
Speaker 11: is facing physical and fiscal demise. absent Trump's contributions and
32:10
Speaker 11: necessary recognition for that. I think what happened in the
32:13
Speaker 11: ballroom case where the administration destroyed the White House's historic
32:16
Speaker 11: East Wing to build a ballroom looms large over this
32:19
Speaker 11: Kennedy case and many of the cases we're seeing to
32:22
Speaker 11: Trump's efforts to make changes to D.C.
32:24
Speaker 4: Landmarks.
32:24
Speaker 2: The fight has really captured the public's attention. A few
32:28
Speaker 2: weeks ago, hundreds of people protested at the Kennedy Center
32:31
Speaker 2: and formed a human chain around the building.
32:34
Speaker 11: It does seem like there's quite a bit of interest
32:36
Speaker 11: at hearings I've gone to in court. Very often you
32:38
Speaker 11: see people who come from groups defending the arts. They
32:42
Speaker 11: come in matching red T-shirts to show their support for
32:44
Speaker 11: the Kennedy Center, to cheer on Representative Beatty. Those are
32:47
Speaker 11: court hearings you've got to get to early because a
32:49
Speaker 11: lot of members of the public seem interested.
32:51
Speaker 2: There doesn't seem to be as much court action on
32:54
Speaker 2: Trump's plans to build a triumphal arch at Memorial Circle.
33:00
Speaker 2: And there were reports of heavy equipment at the site.
33:03
Speaker 2: with workers saying they were just collecting soil samples. But
33:08
Speaker 2: who knows?
33:10
Speaker 9: Exactly.
33:10
Speaker 10: Who knows?
33:11
Speaker 11: In that case, you know, like some of these other cases,
33:13
Speaker 11: the posture is that the case is ongoing and the
33:15
Speaker 11: government in this case is supposed to give the court
33:18
Speaker 11: 48 hours notice before conducting any arch-related activities on Memorial Circle.
33:22
Speaker 11: This sort of came up a few weeks ago when, yes,
33:25
Speaker 11: there were reports of equipment being cited. And so in
33:28
Speaker 11: that case, the judge, Tanya Chutkin, in that case did
33:30
Speaker 11: order the government to To give that 48 hours notice,
33:33
Speaker 11: they are filing status updates in that case as well.
33:36
Speaker 11: It's one of several that is pending, where the judge
33:39
Speaker 11: maybe didn't feel it was the right time to block work,
33:42
Speaker 11: but is saying, please keep me posted, essentially. Because some
33:45
Speaker 11: of this has been people see what happened to the ballroom,
33:48
Speaker 11: and then they get wind that another project may be underway,
33:51
Speaker 11: they run to court. because they don't want to see their,
33:54
Speaker 11: you know, beloved landmark or whatever it may be, be
33:56
Speaker 11: destroyed before, you know, they've had a chance to bring
33:59
Speaker 11: it to the judge. So we're seeing that in a
34:01
Speaker 11: couple of these cases where they're coming to court ahead
34:04
Speaker 11: of the fact and the judge says, I don't think
34:06
Speaker 11: I can do anything about this right now, but keep
34:08
Speaker 11: me posted because maybe that will change.
34:11
Speaker 2: And in that lawsuit, like many others, the plaintiffs, Vietnam
34:15
Speaker 2: veterans in that case, are saying only Congress can erect
34:19
Speaker 2: monuments in Washington, D.C., What's the Trump administration's response to that?
34:25
Speaker 11: Essentially, the government has been relying on a federal law
34:28
Speaker 11: from about 100 years ago where Congress had looked to
34:31
Speaker 11: put two columns on that site, and they're claiming that
34:35
Speaker 11: that authorizes them to build the giant, maybe up to
34:39
Speaker 11: 250-foot arch.
34:40
Speaker 10: So that's been their argument in court, certainly. In that case, the.
34:44
Speaker 11: Challenges are Vietnam War veterans who say they'd like to
34:46
Speaker 11: be buried in Arlington Cemetery and have concerns about the
34:49
Speaker 11: way the arch would obstruct views of from the cemetery.
34:53
Speaker 2: So finally, we have, these all seem so random. He
34:59
Speaker 2: wants to paint the granite exterior of the Eisenhower Executive
35:03
Speaker 2: Office building. I mean, does that include putting his name
35:07
Speaker 2: on it? I don't get that one.
35:08
Speaker 11: I certainly can't speculate in the mind of Donald Trump
35:12
Speaker 11: and what he wants to do, what he wants to
35:13
Speaker 11: do to these buildings aesthetically. But yes, in that case,
35:15
Speaker 11: there has yet to be an attempt to put his
35:17
Speaker 11: name on the building. What they're interested in doing is
35:20
Speaker 11: painting the granite exterior white. This is 100-year-old buildings. And
35:24
Speaker 11: in that case, we have historic preservationists who've sought to
35:26
Speaker 11: block the effort.
35:27
Speaker 10: Federal judge has not so far blocked it.
35:29
Speaker 11: That judge, Daphne Friedrich, is a Trump appointee who has,
35:32
Speaker 11: at this point, not been willing to stop work for
35:34
Speaker 11: the administration. But again, the case is still on her
35:36
Speaker 11: docket should circumstances change. The latest was that she has
35:40
Speaker 11: allowed the government to move forward with testing paint on
35:42
Speaker 11: parts of the granite exterior, perhaps ones that are less visible,
35:46
Speaker 11: underside of rock kind of things.
35:48
Speaker 10: To see how the stone responds. So that's another example.
35:52
Speaker 11: And I think it's really just part of Trump's efforts
35:54
Speaker 11: to kind of just leave his aesthetic mark on the district.
35:57
Speaker 11: And yes, that includes putting his name, it includes painting
36:00
Speaker 11: things that were white, gold, painting things that were gold, white,
36:04
Speaker 11: you know, I just think that's maybe part of his aesthetic.
36:06
Speaker 10: And we've seen it some and how he's.
36:07
Speaker 11: Redecorated the Oval Office with a lot more gold and,
36:10
Speaker 11: you know, kind of a gilded look. So while I
36:13
Speaker 11: won't speculate on his, you know, aesthetic preferences, I think
36:16
Speaker 11: we've seen some of it and it all seems pretty consistent.
36:19
Speaker 2: And in an interview with Time Magazine, Trump said that
36:22
Speaker 2: he's asked his White House chief of staff to have
36:26
Speaker 2: the Oval Office designated a federal landmark. Who knows, you
36:31
Speaker 2: may be covering that case next, Suzanne. Thanks so much.
36:35
Speaker 2: That's Bloomberg Law Reporter Suzanne Moniak. And that's it for
36:39
Speaker 2: this edition of the Bloomberg Law Show. Remember, you can
36:41
Speaker 2: always get the latest legal news on our Bloomberg Law Podcast.
36:45
Speaker 2: You can find them on Apple Podcasts, Spotify, and at
36:48
Speaker 2: www.bloomberg.com slash podcast slash law. And remember to tune into
36:54
Speaker 2: the Bloomberg Law Show every weeknight at 10 p.m. Wall
36:57
Speaker 2: Street time. I'm June Grosso, and you're listening to Bloomberg.