# This Week at the Supreme Court

An episode of [Bloomberg Law](https://invisiblenetwork.ai/podcast/277975394), 14 Dec 2025, 38 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7c892d84-801f-4c0b-b0e9-ae2b0012ff5f/4b9e9eba-00ad-4b10-9af9-b3b300031152/audio.mp3?utm_source=Podcast&in_playlist=91224201-26a6-429d-ac3c-ae2b0012ff6d

June Grasso talks to legal experts about the top Supreme Court stories of the week See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
[0:08] Speaker 2: The Supreme Court's conservatives appear poised to give the president
[0:13] Speaker 2: control over dozens of independent federal agencies. At oral arguments
[0:18] Speaker 2: on Monday, they suggested they will allow President Trump to
[0:23] Speaker 2: fire Rebecca Kelly Slaughter from the Federal Trade Commission, despite
[0:27] Speaker 2: a law that says commissioners can only be fired for
[0:31] Speaker 2: specific reasons. The liberal justices, like Sonya so to Mayor
[0:36] Speaker 2: and Elena Kagan, expressed alarm at giving the president such
[0:40] Speaker 2: unchecked authority over agencies that overlook crucial areas like nuclear energy,
[0:47] Speaker 2: consumer products safety, and labor relations.
[0:51] Speaker 3: You're asking us to destroy the structure of government and
[0:55] Speaker 3: to take away from Congress its ability to protect its
[1:01] Speaker 3: idea that the government is better structured with some agencies
[1:07] Speaker 3: that are independent.
[1:09] Speaker 4: So the result of what you want is that the
[1:12] Speaker 4: president is going to have massive, unchecked, uncontrolled power not
[1:17] Speaker 4: only to do traditional execution but to make law.
[1:21] Speaker 2: But the conservative justice is, like Brett Kavanaugh and Neil Gorsuch, say,
[1:26] Speaker 2: the real concern is Congress's creation of agencies that exercise
[1:31] Speaker 2: executive power but can't be held accountable.
[1:35] Speaker 5: Independent agencies are not accountable to the people. They're not elected,
[1:41] Speaker 5: as Congress and the President are and are exercising massive
[1:45] Speaker 5: power over individual liberty and billion dollar industries, whether it's
[1:50] Speaker 5: the FCC or the FTC or whatever it might be.
[1:54] Speaker 6: Tomorrow, we could have the Labor Commission, the Education Commission,
[1:58] Speaker 6: the Environmental Commission, and rather than Departments of Interior and
[2:04] Speaker 6: so forth.
[2:05] Speaker 2: In allowing the president to fire the heads of independent agencies,
[2:09] Speaker 2: the court would be overturning a ninety year old president
[2:13] Speaker 2: called Humphreys executor that protects their independence. My guest is
[2:18] Speaker 2: constitutional law expert William Traynor, a professor at Georgetown Law
[2:23] Speaker 2: Bill tell us about the issues in Rebecca Slaughter's case
[2:28] Speaker 2: against Trump for firing her.
[2:30] Speaker 7: The issue before the screen Court is that Congress puts
[2:33] Speaker 7: the limits on when the president and fire the heads
[2:38] Speaker 7: of independent agencies. So an independent agency is like the
[2:41] Speaker 7: Federal Trade Commission or the Federal Reserve. So really, since
[2:46] Speaker 7: the start of the Constitution, Congress has imposed limits on
[2:49] Speaker 7: when the president can fired these people. The question in
[2:52] Speaker 7: the case is whether that's unconstitutional, Whether the president can
[2:56] Speaker 7: fire the head of an independent agency for any reason,
[2:59] Speaker 7: even if Congress has said they can only fire them,
[3:02] Speaker 7: you know, if they're engaged in bad behavior. So this
[3:06] Speaker 7: is a very big deal. So much of a government
[3:08] Speaker 7: structure that protects people in different ways or regulates the
[3:11] Speaker 7: economy is done through independent agencies. Congress has wanted to
[3:15] Speaker 7: insulate them from total executive control, and the Supreme Court
[3:20] Speaker 7: is deciding right now whether, in fact, the president has
[3:23] Speaker 7: the kind of control that comes with being able to
[3:25] Speaker 7: fire the leaders of the agencies.
[3:27] Speaker 2: In these oral arguments, you often hear the Supreme Court
[3:29] Speaker 2: justices say, well, that's a job for Congress. You know,
[3:33] Speaker 2: that's not something that we should be interfering in. So
[3:37] Speaker 2: why are they interfering here where Congress has set up
[3:40] Speaker 2: these agencies and the rules.
[3:43] Speaker 7: That's a great question. There had been so many times
[3:45] Speaker 7: in which the Court is saying, this is a political matter,
[3:49] Speaker 7: we shouldn't be deciding. But at the same time, the
[3:52] Speaker 7: conservative justices of the Court are very dedicated to what's
[3:57] Speaker 7: called the unitary executive theory, which means that the president
[4:01] Speaker 7: is in total charge of the executive branch. So what
[4:05] Speaker 7: they're saying here is Congress doesn't get to be involved.
[4:08] Speaker 7: The president is in total charge of the executive branch,
[4:11] Speaker 7: including what have historically been things like the independent agencies.
[4:15] Speaker 7: That is kind of one of the core commitments that
[4:18] Speaker 7: has really been at the basis of what Keef Justice
[4:22] Speaker 7: Roberts has thought really going back to when he was
[4:24] Speaker 7: a young attorney, and that's the same thing for most
[4:27] Speaker 7: of the members of the whole conservative wing.
[4:30] Speaker 2: What kind of concerns did the conservative justices express during
[4:34] Speaker 2: the oral arguments about this ninety year old President Humphrey's executor.
[4:41] Speaker 7: There are two things that we're seeing the conservative wing
[4:44] Speaker 7: of the Court struggle with. One is they want the
[4:47] Speaker 7: Federal Reserve to continue to be independent. They don't want
[4:52] Speaker 7: the president to be able to fire somebody on the
[4:55] Speaker 7: Federal Reserve. And they don't want that because you know,
[4:58] Speaker 7: that would be terrible for the economy. If the Federal
[5:01] Speaker 7: Reserve is setting interest rates just in order to help
[5:04] Speaker 7: the president rather than to help the economy, that would
[5:07] Speaker 7: be a disaster, be a disaster for the market, the
[5:10] Speaker 7: disaster for the economy as a whole. So the conservative
[5:13] Speaker 7: wing of the Court i think wants to overturn Humphrey's executor,
[5:17] Speaker 7: but they're trying to come up with some rationale in
[5:20] Speaker 7: which they can say the president can fire somebody on
[5:24] Speaker 7: the FTC, but he can't fire somebody on the Federal Reserve.
[5:28] Speaker 7: And they're going to be looking at the Federal Reserve
[5:31] Speaker 7: later in the term. That's a big concern for them.
[5:34] Speaker 7: So I think that animates all of the conservative justices
[5:37] Speaker 7: of the Court. I think also, you know, what I'm
[5:40] Speaker 7: hearing with the Chief Justices, what he's trying to do
[5:43] Speaker 7: is to come up with some way in which there's
[5:46] Speaker 7: some agencies where Congress can in fact limit the president's
[5:50] Speaker 7: ability to fire people. And he's thinking about, you know,
[5:54] Speaker 7: are the ones that are essentially kind of judicial in
[5:57] Speaker 7: their function, and you know, that may be an area
[6:00] Speaker 7: in which Congress can establish requirements or when the prison
[6:04] Speaker 7: can terminate somebody, but that's not the Federal Trade Commission.
[6:07] Speaker 7: Federal Trade Commission is not making the judicial decisions, you know,
[6:11] Speaker 7: it's very much deciding executive type rules. So I think
[6:14] Speaker 7: we're seeing two things on the conservative wing of the Court.
[6:17] Speaker 7: One is they're trying to come up with some way
[6:20] Speaker 7: in which they can say the President can fire somebody
[6:22] Speaker 7: the FDC, but not at the FED. And I think
[6:25] Speaker 7: the Chief is trying to come up with some way
[6:28] Speaker 7: in which there's some type of agencies in which the
[6:31] Speaker 7: president can be limited by Congress, but those would be
[6:34] Speaker 7: ones that are really deciding kind of fuzzi judicial matters,
[6:38] Speaker 7: not the FDC.
[6:39] Speaker 2: The liberals painted a dire picture of what would happen
[6:42] Speaker 2: if Trump wins here. Just as Soto Mayor said to
[6:45] Speaker 2: the Solicitor General, you're asking us to destroy the structure
[6:49] Speaker 2: of government. Do you think it's that serious.
[6:53] Speaker 7: I think that's absolutely right. You know, we have had
[6:56] Speaker 7: independent agencies which largely exists to protect peace with limited power,
[7:01] Speaker 7: you know, and they've been in place really for one
[7:04] Speaker 7: hundred years. And the idea is that these should be
[7:07] Speaker 7: basically bipartisan or apolitical. They should not just be tools
[7:12] Speaker 7: of the president. So what the court is considering right
[7:14] Speaker 7: now is whether that whole kind of structure gets got it.
[7:17] Speaker 7: So the stakes on this are huge.
[7:20] Speaker 2: Well, President Trump wasn't specifically mentioned by name, two of
[7:26] Speaker 2: the liberal justices, Elina Kagan and Katanji Brown Jackson, did
[7:32] Speaker 2: make broad references to his firing of experts and dismantling
[7:37] Speaker 2: of the Department of Education.
[7:39] Speaker 4: That the more realistic danger here is that we'll have
[7:43] Speaker 4: an education department, as authorized by Congress by law that
[7:47] Speaker 4: won't have any employees in it.
[7:50] Speaker 8: Having a president come in and fire all the scientists
[7:55] Speaker 8: and the doctors and the economists and the PhDs and
[7:58] Speaker 8: replacing them with loyalists and people who don't know anything
[8:03] Speaker 8: is actually not in the best interest of the citizens
[8:06] Speaker 8: of the United States.
[8:07] Speaker 7: You know, what we're seeing right now is that in
[8:09] Speaker 7: the Trump administration, you know, the independent agencies and all
[8:14] Speaker 7: of the government washtoogs, there's an attempt to politicize them
[8:17] Speaker 7: in a way that you know, we've never seen before.
[8:20] Speaker 7: So the stakes are very different, and they're much higher.
[8:23] Speaker 7: If Humphrey's executor has been overturned in President bush forty
[8:29] Speaker 7: threes administration, the stakes would have been very different because
[8:33] Speaker 7: President Bush was not focused on making independent agencies kind
[8:37] Speaker 7: of the tool for his politics. But that's what we're
[8:40] Speaker 7: seeing with President Trump, and that's why the stakes are
[8:42] Speaker 7: so high. They've always been big, but in this administration,
[8:47] Speaker 7: where there's such an attempt to kind of move away
[8:50] Speaker 7: from scientific expertise and neutral decision making to control every
[8:55] Speaker 7: part of the executive branch, the stakes are huge. And
[8:59] Speaker 7: that's really part of what those three liberal justices we're questioning.
[9:04] Speaker 7: You know, the other thing that they really are focusing
[9:06] Speaker 7: in an honor. First of all, it's very very hard
[9:10] Speaker 7: to come up with some line where you can say,
[9:13] Speaker 7: Congress can limit the president's ability to fire the heads
[9:16] Speaker 7: of the sec they can't fire at will the heads
[9:20] Speaker 7: of the set. And I can't think of any kind
[9:22] Speaker 7: of coherent way to distinguish those two cases. And that's
[9:25] Speaker 7: one of the things that the liberals were pressing on.
[9:28] Speaker 7: You know, I think they're also pressing on the history.
[9:30] Speaker 7: If you look at the constitutions, the text of the
[9:32] Speaker 7: constitutions doesn't say that the president gets to fire people
[9:35] Speaker 7: in the executive rection. It doesn't deal with removal at all.
[9:39] Speaker 7: So there's not a text that really helps the conservative
[9:42] Speaker 7: way of the Court and Congress really, starting in the
[9:45] Speaker 7: Washington administration, limited the president's ability to fire people running
[9:50] Speaker 7: agencies kind of what was analogous to modern agencies at
[9:53] Speaker 7: the time. So I think what the liberals on the
[9:55] Speaker 7: Court are focusing on are the text, the original understanding,
[9:59] Speaker 7: as well as the huge consequences of essentially giving the
[10:03] Speaker 7: president the power to politicize all of the dependent agencies.
[10:06] Speaker 2: I wonder what happens when there is a democratic president.
[10:09] Speaker 2: Do the conservatives then try to limit the ruling they're
[10:13] Speaker 2: expected to make.
[10:14] Speaker 5: Here.
[10:15] Speaker 7: You know, one of the reasons why I think that
[10:18] Speaker 7: the Court should not overturn Humphrey's Executor is to the
[10:22] Speaker 7: extent that you have any kind of political terms, you're
[10:25] Speaker 7: giving a democratic president the power to do exactly what
[10:28] Speaker 7: President Trump is doing, to politicize every independent agency in
[10:32] Speaker 7: the way that that president wants, you know. And then
[10:35] Speaker 7: how does a conservative court say, well, you know, Humphrey
[10:38] Speaker 7: Executors is back. Once you establish a rule, you know,
[10:41] Speaker 7: it applies to everybody. And that's something that they really
[10:44] Speaker 7: have to think true because of the long term consequences,
[10:47] Speaker 7: because I don't think they would feel comfortable, you know,
[10:50] Speaker 7: with limiting a democratic president after they allow President Trump
[10:54] Speaker 7: to fire people whenever he wants.
[10:56] Speaker 2: So then you think this is the end of Humphrey's executs.
[11:00] Speaker 7: Yeah, I think they will completely overrule Humphrey's Executor. I
[11:04] Speaker 7: think the one question for me is whether the Chief
[11:08] Speaker 7: comes up with some limiting principle in which if there
[11:13] Speaker 7: are you know, quasi judicial independent agencies, then Congress can
[11:18] Speaker 7: put limitations on the president's ability to fire. But you know,
[11:21] Speaker 7: the basic point is I think they're going to overturn
[11:23] Speaker 7: Humphrey's executive So I think what the Court will try
[11:26] Speaker 7: to do is to say the president can't fire Jerome Power,
[11:30] Speaker 7: can't fire at least a cook. But you know, I
[11:32] Speaker 7: don't think that that is a coherent approach, you know,
[11:35] Speaker 7: because I think it would be based on history, but
[11:37] Speaker 7: the history doesn't support it.
[11:39] Speaker 2: Well. We often see some strained interpretations of history from
[11:42] Speaker 2: this court. Thanks so much, Bill. That's Georgetown law professor
[11:47] Speaker 2: William Trainor coming up next. The Court grapples with caps
[11:51] Speaker 2: on campaign spending. I'm June Grosso and you're listening to Bloomberg.
[11:57] Speaker 2: The Supreme Court is considering a Republican led effort to
[12:00] Speaker 2: erase yet another campaign finance regulation, this time the federal
[12:05] Speaker 2: caps that limit how much political parties can spend in
[12:09] Speaker 2: coordination with candidates. It's the latest in a line of
[12:13] Speaker 2: cases where the conservative majority has upended congressionally enacted limits
[12:18] Speaker 2: on raising and spending money to influence elections, and two
[12:23] Speaker 2: hours of arguments on Tuesday showed the entrenched divisions between
[12:27] Speaker 2: the liberal and conservative justices over campaign finance restrictions. Liberal
[12:33] Speaker 2: Justice Sonya Sotomayor said that every time the Court interferes
[12:38] Speaker 2: weakening campaign finance rules, it makes matters worse. While conservative
[12:43] Speaker 2: Justice Brett Kavanaugh said that spending limits have hurt political
[12:48] Speaker 2: parties in an era of unlimited spending by other organizations.
[12:53] Speaker 3: You're telling us that Citizens United and McCutcheon ended up
[12:58] Speaker 3: yes in ample find the voice of corporations, but diminishing
[13:03] Speaker 3: another voice, that of the party. Now you want to
[13:07] Speaker 3: now tinker some more and try to raise the voice
[13:12] Speaker 3: of one party. Our tinkering causes more harm than it
[13:16] Speaker 3: does good.
[13:17] Speaker 5: That's the real source of the disadvantage. Right, you can
[13:19] Speaker 5: give huge money to the outside group, but you can't
[13:23] Speaker 5: give huge money of the party. So the parties are
[13:25] Speaker 5: very much weakened compared to the outside groups.
[13:28] Speaker 2: Chief Justice John Roberts, a potentially pivotal vote, said he
[13:32] Speaker 2: didn't see much difference between contribution limits, which the Court
[13:36] Speaker 2: has long upheld, and the caps on coordinated expenditures.
[13:41] Speaker 6: It seems to me that that's kind of a fiction that, oh,
[13:44] Speaker 6: you know, they're just coordinating expenditures, they're not making direct contributions.
[13:49] Speaker 3: I don't know in substance what the difference is.
[13:51] Speaker 2: Doing away with the caps would overturn a quarter century
[13:55] Speaker 2: old precedent. In the same week, the court appears ready
[13:58] Speaker 2: to overturn an ninety year old president and allow President
[14:02] Speaker 2: Trump to fire the heads of independent agencies. Joining me
[14:06] Speaker 2: is an expert on campaign finance reform, Richard Brofald, a
[14:10] Speaker 2: professor at Columbia Law School. Rich Well, you start by
[14:14] Speaker 2: explaining the federal caps on spending by political parties in
[14:18] Speaker 2: coordination with candidates.
[14:20] Speaker 1: So the Federal Russian Campaign Act, going back to the
[14:23] Speaker 1: nineteen seventies when it was enacted in the aftermath of Artegate,
[14:27] Speaker 1: places limits on donations to candidates, and it also places
[14:31] Speaker 1: limits on donations to parties. It does something else, It
[14:34] Speaker 1: places limits on how much parties can give to candidates,
[14:38] Speaker 1: on the theory that donors, once they max out on
[14:41] Speaker 1: how much the donor can give directly to a candidate,
[14:43] Speaker 1: will then just give to a party to chanting the
[14:46] Speaker 1: money to a candidate. So there's a limit on how
[14:48] Speaker 1: much the parties can give to their candidates. And that
[14:50] Speaker 1: comes up in two ways. One is a literal limit
[14:52] Speaker 1: on contributions actually writing a check, but the parties are
[14:56] Speaker 1: also allowed to engage in their own spending in support
[14:59] Speaker 1: of candidates, and that's called coordinated expenditures. In other words,
[15:03] Speaker 1: the party does the spending, they don't give the candidate
[15:05] Speaker 1: a check, but they do spending to promote the candidate.
[15:08] Speaker 1: Parties are allowed to do that, but the law places
[15:11] Speaker 1: a limit on how much money they can spend supporting candidates.
[15:15] Speaker 1: And again for the same idea that if there is
[15:18] Speaker 1: no limit on how much they could support candidates through spending.
[15:21] Speaker 1: Once again, donors who once they max out on the
[15:24] Speaker 1: direct donation to the candidate would then just give to
[15:26] Speaker 1: the parties and the parties could then use that money
[15:29] Speaker 1: to basically support their candidates. But parties are allowed to
[15:32] Speaker 1: do this in a way that other organizations are not.
[15:35] Speaker 1: Packs are not allowed to coordinate at all with candidates,
[15:38] Speaker 1: so parties get this extra permission to support the candidates directly,
[15:42] Speaker 1: but with a cap on it, and it varies from
[15:45] Speaker 1: state to state based on the population of the state.
[15:48] Speaker 9: And what's going on in this case is.
[15:49] Speaker 1: The National Republican Senate Campaign Committee and JD. Vance, who
[15:53] Speaker 1: this case began was a Senator and a congressman from
[15:56] Speaker 1: Ohio has since retired, have all brought suit challenging this
[15:59] Speaker 1: limit on the ability of parties to coordinate their spending
[16:03] Speaker 1: with candidates.
[16:04] Speaker 2: And there's a longstanding precedent here.
[16:07] Speaker 9: Almost twenty five years ago.
[16:09] Speaker 1: The Supreme Court upheld this limit in a case called
[16:12] Speaker 1: Colorado Republican Sided in two thousand and one, and the
[16:14] Speaker 1: Court said yes, because of the danger of conduits a
[16:18] Speaker 1: party serving as conduits for donor support, these limits make
[16:22] Speaker 1: sense and are constitutional. Well, the Supreme Court is being
[16:25] Speaker 1: asked basically now, is to overturn that decision.
[16:28] Speaker 2: One of the concerns of the liberal justices was that
[16:32] Speaker 2: lifting the limits on party spending would lead to quid
[16:36] Speaker 2: pro quo bribery, so wealthy donors could bypass the individual
[16:41] Speaker 2: contribution limits by donating through parties instead.
[16:45] Speaker 1: I mean, that is the major concern of the liberal
[16:47] Speaker 1: justices and of a call the campaign finance reform community
[16:51] Speaker 1: as a whole, is that this will put another hole
[16:54] Speaker 1: in the campaign finance laws and make it easier for
[16:57] Speaker 1: wealthy donors to channel money to candidates. There's still limits
[17:01] Speaker 1: on their ability to give directly, but this would enable
[17:04] Speaker 1: them to give through the parties and so that money
[17:06] Speaker 1: would still get to candidate.
[17:07] Speaker 9: So yeah, that is the core concern.
[17:09] Speaker 1: A second concern is, depending on how the Court writes
[17:12] Speaker 1: this decision, it could be the green light for further
[17:15] Speaker 1: challenges to other aspects of the campaign finance laws, depending
[17:19] Speaker 1: on exactly how.
[17:20] Speaker 9: They write this.
[17:21] Speaker 1: So it's both upfront making it easier to channel money
[17:25] Speaker 1: from donors to candidates, and also yet one more case
[17:29] Speaker 1: eroding Congress's ability to place limits on campaign money.
[17:33] Speaker 2: The Administration and the Republican's argument centers on free speech
[17:39] Speaker 2: right as these campaign finance cases since Citizens United have done.
[17:45] Speaker 1: The essential argument is that this is a limit on
[17:47] Speaker 1: the ability of parties to speak, and that you don't
[17:50] Speaker 1: need it. That the combination of disclosure laws, anti bribery laws,
[17:55] Speaker 1: and limits on literally earmarking that's the term, that's use
[17:59] Speaker 1: a donation that our donor gives to a party to
[18:01] Speaker 1: be used for a candidate, that that's enough. That those
[18:04] Speaker 1: three things banning bribes, requiring disclosure, and saying that when
[18:08] Speaker 1: a donor gives a party a donation, they can't literally
[18:11] Speaker 1: say this is going to candidate so and so, that
[18:13] Speaker 1: that's enough, and that to go beyond that is to
[18:15] Speaker 1: constrain the ability of parties as free speech actors, as
[18:18] Speaker 1: First Amendment actors, to participate in political process.
[18:21] Speaker 2: Just as Brett Kavanaugh said, you can give huge money
[18:25] Speaker 2: to the outside group, but you can't give huge money
[18:27] Speaker 2: to the party, and so the parties are very much
[18:30] Speaker 2: weakened compared to the outside group.
[18:32] Speaker 9: See talking about super PACs.
[18:33] Speaker 1: And indeed, that is an argument that many people have
[18:36] Speaker 1: raised who don't like this law, including people who might
[18:38] Speaker 1: liberals or reformers. They say this law might have made
[18:41] Speaker 1: some sense when it was first adopted, but given the
[18:44] Speaker 1: proliferation of super PACs and other outside groups, we'd be
[18:47] Speaker 1: better off if parties actually had a bigger voice, that
[18:50] Speaker 1: parties can play a coordination function, that parties maybe can
[18:54] Speaker 1: be a little less extreme than some outside groups, that
[18:57] Speaker 1: parties have more of an interest in governance rather than
[18:59] Speaker 1: being single issue and that actually if we could start
[19:02] Speaker 1: roll over now that the outside groups have kind of
[19:05] Speaker 1: unlimited voice, that anything that strengthens the parties is actually
[19:09] Speaker 1: a good thing, and that you see many people who
[19:11] Speaker 1: are not conservatives who are taking that position, who are
[19:14] Speaker 1: not First Amendment absolutists, but think that in fact, the
[19:17] Speaker 1: campaign financ system has gotten unbalanced and it would actually
[19:20] Speaker 1: be good to strengthen the role of parties.
[19:22] Speaker 9: And this could do that.
[19:24] Speaker 2: There was also an argument about standing made by those
[19:28] Speaker 2: defending the caps that JD. Vance, who's no longer a
[19:32] Speaker 2: Senate candidate, doesn't have a stake in the case and
[19:36] Speaker 2: thus there's no standing. And then there was a lot
[19:39] Speaker 2: of discussion about, well, is he going to run for president?
[19:44] Speaker 2: I don't think this standing argument is going anywhere, but
[19:46] Speaker 2: it's interesting, so tell us about it.
[19:49] Speaker 1: So Ramond Martinez was the man appointed by the court
[19:52] Speaker 1: to defend the law when the government declined to do so,
[19:55] Speaker 1: and he opened by saying, this case is a big deal.
[19:57] Speaker 1: You know, anytime you're being asked to overturn a president
[20:00] Speaker 1: that's twenty five years old, should be very hesitant, and
[20:02] Speaker 1: you should make sure that this is a case that's
[20:04] Speaker 1: jurisdictionally sound, and he basically said it's not. So this
[20:08] Speaker 1: case was brought by some individuals JD. Vance and Congressman
[20:12] Speaker 1: Cheveaux from Ohio, and also by the National.
[20:14] Speaker 9: Republican Senate Committee.
[20:16] Speaker 1: With respect to the two individuals, one of them is
[20:18] Speaker 1: actually retired and no longer in politics, So that gets
[20:20] Speaker 1: it down to Vance. And Vance has pretty clearly said
[20:24] Speaker 1: I don't know if I'm running, or more than point,
[20:26] Speaker 1: I don't currently have a plan to run, saying I
[20:28] Speaker 1: might run, I might not run. So mister Martinez's argument was, well,
[20:32] Speaker 1: this case isn't right. We don't know if he's running,
[20:34] Speaker 1: so there's no candidate here to bring it, and therefore
[20:38] Speaker 1: there's no plaintiff. He's not a good plaintiff because whether
[20:41] Speaker 1: he's going to run a speculative. He doesn't clearly have
[20:43] Speaker 1: a stake in this case. So there were some back
[20:46] Speaker 1: and forth on that, but it does seem unlikely. Well,
[20:49] Speaker 1: you never know what the Supreme Court, but almost all
[20:51] Speaker 1: of the oral argument was really focused on the merits
[20:54] Speaker 1: of the case.
[20:55] Speaker 2: It doesn't seem as clear as in other cases. But
[20:57] Speaker 2: can you tell where the justices are on this? Gorsuch
[21:00] Speaker 2: didn't even ask a question.
[21:02] Speaker 1: It's worth pointing out that in every single campaign finance
[21:05] Speaker 1: case the Court has taken since Chief Justice Roberts became
[21:09] Speaker 1: Chief Justice and Justice Alito joined the court, the attack
[21:13] Speaker 1: on campaign finance law has won.
[21:15] Speaker 9: That's about eight cases.
[21:16] Speaker 1: And turn it around and there's not been a single
[21:19] Speaker 1: case that the Supreme Court has taken since two thousand
[21:21] Speaker 1: and five on campaign finance law where the law was
[21:24] Speaker 1: the state. That's all I think I need to say
[21:26] Speaker 1: about that.
[21:27] Speaker 2: Yes, Rich, that about says it all. So in light
[21:30] Speaker 2: of that, there were also questions about what's next. Justice
[21:34] Speaker 2: Katanji Brown Jackson basically asked the Republican's lawyer, former Solicitor
[21:40] Speaker 2: General Nol Francisco, if these caps on coordinated expenditures go down,
[21:45] Speaker 2: what's next the caps on contribution limits?
[21:48] Speaker 8: In McCutcheon, your clients filed a brief saying that the
[21:52] Speaker 8: sky wouldn't fall if the court struck down aggregate limits
[21:56] Speaker 8: because we still have coordinated expended truths. And now here
[22:00] Speaker 8: we are today with your clients saying no more coordinate
[22:04] Speaker 8: expenditure limits. And so I'm wondering if, and I think
[22:09] Speaker 8: others have sort of raised that concern as well, we're
[22:13] Speaker 8: going to be back here with the other kinds of
[22:16] Speaker 8: limits you with you making the same kinds of arguments.
[22:19] Speaker 10: Well, your honor, I think different limits are on stronger
[22:23] Speaker 10: footing than others. I am not going to say that
[22:26] Speaker 10: my clients are not going to come back and try
[22:28] Speaker 10: to challenge other limitations.
[22:31] Speaker 1: And indeed, it's the lawyer for people who are defending
[22:33] Speaker 1: this law, which I should say is not the government.
[22:35] Speaker 1: This is a federal statute. Well, the Trump administration will
[22:38] Speaker 1: not defend it. In fact, they'e actually joined in the
[22:40] Speaker 1: attack on it. So the statue was being defended by
[22:43] Speaker 1: two lawyers. One was a lawyer pointed about the Court
[22:46] Speaker 1: to speak for the statute, in addition the lawyer for
[22:49] Speaker 1: the Democratic organizations, and they both argue that basically this
[22:52] Speaker 1: is the bait and switch that's been going on in
[22:54] Speaker 1: campaign finance law for a long time. Someone says, well,
[22:57] Speaker 1: given changes in the law, this particular restriction does make
[23:00] Speaker 1: any sense, so you should strike it down. And then
[23:03] Speaker 1: they come along and say, well, now you've struck down
[23:05] Speaker 1: this one, the next restriction doesn't make any sense either,
[23:07] Speaker 1: so strike that down. And there seems to be kind
[23:09] Speaker 1: of a salami tactic aspect to this. A number of
[23:12] Speaker 1: the justices are very very skeptical, more than skeptical about
[23:15] Speaker 1: the constitutionality of the contribution restrictions. They don't have to
[23:18] Speaker 1: decide that in this case, but the Court has traditionally
[23:21] Speaker 1: treated coordinated expenditures as the constitutional equivalent of contributions. If
[23:27] Speaker 1: they're going to start protecting coordinated expenditures more saying that
[23:30] Speaker 1: they're more protected from limitation, it's not a big leap
[23:33] Speaker 1: to say that. That kind of thinking would also apply
[23:35] Speaker 1: to the contribution restrictions.
[23:37] Speaker 2: Finally, if by chance, the Court were to uphold the
[23:41] Speaker 2: spending caps, would you be surprised, fall off your chair?
[23:45] Speaker 2: Surprised or mmm, that's interesting.
[23:48] Speaker 9: Surprised, Well, probably fall off my chair.
[23:52] Speaker 1: I mean when the Court upheld this law in twentsand
[23:55] Speaker 1: and one, it was a five to four vote them.
[23:57] Speaker 1: And in terms of just the carmentary this Supreme Court,
[24:00] Speaker 1: I'm not sure if Justice Barrett has written on a
[24:03] Speaker 1: big campaign finance case, but all the other Conservatives have
[24:06] Speaker 1: and they've been rather consistently skeptical campaign finance.
[24:10] Speaker 2: The record you cid it does seem to indicate that
[24:12] Speaker 2: this cap is the next to go. Always great to
[24:15] Speaker 2: have you on, rich That's Professor Richard Braflt. Of Columbia
[24:19] Speaker 2: Law School. Coming up next on the Bloomberg Law Show.
[24:22] Speaker 2: Will investment funds be facing more lawsuits by activist investors?
[24:28] Speaker 2: Remember you can always get the latest legal news by
[24:30] Speaker 2: listening to our Bloomberg Law podcast wherever you get your
[24:34] Speaker 2: favorite podcasts. I'm June Grasso when this is Bloomberg.
[24:39] Speaker 5: I think this case is extremely close. I'll just put
[24:43] Speaker 5: cards out there on that.
[24:45] Speaker 2: And that deduction by Justice Brett Cavanaugh seemed correct because
[24:50] Speaker 2: Wednesday's eighty minute oral argument at the Supreme Court didn't
[24:54] Speaker 2: give a clear indication about the likely outcome. Wall Street
[24:59] Speaker 2: is watching the case over whether to allow investors to
[25:02] Speaker 2: broadly use an eighty five year old law to sue
[25:06] Speaker 2: funds over their management decisions. A lower court had allowed
[25:10] Speaker 2: activist investors led by SABA Capital Master Fund to sue
[25:15] Speaker 2: eleven closed end funds, including some affiliated with FS Credit
[25:20] Speaker 2: Opportunities and Blackrock. Justice Sonya Soto Mayor pointed to the
[25:24] Speaker 2: legislative history of the Investment Company Act to show that
[25:28] Speaker 2: Congress intended to allow private rights of action.
[25:32] Speaker 3: I know that many of my colleagues don't believe in
[25:35] Speaker 3: statutory history, but here we have both a House and
[25:40] Speaker 3: a Senate reports, a company, the nineteen eighty amendments to
[25:44] Speaker 3: the ICA, and in both the House and the Senate
[25:48] Speaker 3: reports it says that quote, private rights of action for
[25:54] Speaker 3: violations of the federal securities laws are a necessary adjunct
[25:58] Speaker 3: to the secs and for enforcement efforts.
[26:02] Speaker 2: But in recent decades, the Supreme Court has avoided finding
[26:05] Speaker 2: private rights of action unless Congress expressly authorizes them in
[26:10] Speaker 2: a statute. And Conservative Justice Neil Gorsich was critical of
[26:15] Speaker 2: allowing so called implied rights of action.
[26:19] Speaker 6: Pretty disastrous for our system of government, where the people
[26:23] Speaker 6: are supposed to write the laws that govern them, not judges.
[26:27] Speaker 2: The Trump administration is backing the mutual funds. Joining me
[26:31] Speaker 2: is securities law expert James Park, a professor at UCLA
[26:35] Speaker 2: Law School. Jim tell us about this legal fight.
[26:39] Speaker 11: Start sort of from the beginning. You have a hedge
[26:42] Speaker 11: fund SABA Capital, and one of its strategies is it
[26:46] Speaker 11: buys stock in mutual funds, mutual funds that are closed
[26:50] Speaker 11: and did which means that they have stock trading in
[26:53] Speaker 11: secondary markets. And the ideavia on the strategy is you
[26:56] Speaker 11: buy a substantial stake and you influence the governance of
[27:00] Speaker 11: the fund. You might think that it has poor governance,
[27:03] Speaker 11: and then that should increase the price of the stock.
[27:06] Speaker 11: That's what activist stock investors typically do, and then you
[27:10] Speaker 11: hopefully sell at a profit. And so they did this
[27:13] Speaker 11: for a number of mutual funds, and the funds basically
[27:18] Speaker 11: tried to take away their right to vote. There was
[27:20] Speaker 11: a state law in the state where they were formed
[27:22] Speaker 11: which said that you know, if you pass a resolution,
[27:25] Speaker 11: you can take away a shareholder's right to vote unless
[27:29] Speaker 11: a majority of the other shareholders basically give it back.
[27:32] Speaker 11: And this is, you know, almost a takeover defense sort
[27:35] Speaker 11: of thing. It reduces their influence on the company's governance.
[27:38] Speaker 11: And so what SABA Capital is arguing is that that
[27:42] Speaker 11: violates a law, a federal law called the Investment Company Act,
[27:46] Speaker 11: which is passed in nineteen forty, which is meant to
[27:49] Speaker 11: regulate mutual funds. The Investment Company Act basically says that
[27:53] Speaker 11: shareholders are supposed to have votes proportionate to the number
[27:56] Speaker 11: of shares that they own. And so what SABA the
[28:00] Speaker 11: Capital was arguing is that we have a private right
[28:03] Speaker 11: of action to sue and the remedy should be recision,
[28:06] Speaker 11: which means basically, we get our money back. And so
[28:09] Speaker 11: there's a question as to whether the Investment Company Act
[28:12] Speaker 11: authorizes a lawsuit like this, because the language does not
[28:16] Speaker 11: come out and say in a very straightforward way that
[28:20] Speaker 11: you have the right to sue for violations of the
[28:22] Speaker 11: Investment Company Act. And so the only way you can
[28:25] Speaker 11: say they have a right to sue is to say
[28:26] Speaker 11: there's something called an implied remedy here, sort of an
[28:30] Speaker 11: implicit right to sue that the Court can basically say
[28:34] Speaker 11: is evident from the law.
[28:36] Speaker 2: The Second Circuit Court of Appeals, which handles a lot
[28:40] Speaker 2: of these kind of financial cases and is well respected,
[28:44] Speaker 2: do it allow a private right of action?
[28:47] Speaker 9: They did.
[28:47] Speaker 11: They basically did in a different case. And Judge Laval,
[28:51] Speaker 11: who is a very prominent, respected Second Circuit judge, said
[28:55] Speaker 11: that the statute has language that can be read to
[29:00] Speaker 11: indicate that Congress intended for private parties to be able
[29:05] Speaker 11: to bring suit for recision when there is a violation
[29:09] Speaker 11: of the Investment Company Act, and he mainly based his
[29:13] Speaker 11: argument on the text. The text of the law says,
[29:16] Speaker 11: you know, if you hihilated the Investment Company Act, then
[29:21] Speaker 11: the various agreement that you entered into with the mutual
[29:24] Speaker 11: fund is unenforceable. It talks about, you know, in certain circumstances,
[29:29] Speaker 11: recision should not be denied by a party if the
[29:32] Speaker 11: benefit of recision outweighs some of the downsides. So there
[29:36] Speaker 11: is language that indicates that Congress might have envisioned these
[29:41] Speaker 11: private lawsuits happening, but it's not set in a straightforward way,
[29:45] Speaker 11: and I think that's what made the question ambiguous. And
[29:48] Speaker 11: in fact, the Third Circuit and a number of other
[29:51] Speaker 11: circuits have held the opposite and said that there is
[29:54] Speaker 11: not an implied right to sue under the Investment Company Act,
[29:59] Speaker 11: and Meeting Court generally has not favored these implicit rights,
[30:03] Speaker 11: which are not straightforward in the text of the statute.
[30:07] Speaker 2: And what were the concerns of the justices about allowing
[30:11] Speaker 2: a private right of action?
[30:13] Speaker 11: There were, you know, a number of concerns, and they
[30:15] Speaker 11: mostly focused on the statutory interpretation argument as opposed to
[30:19] Speaker 11: broader policy concerns. And you know, I think that they
[30:23] Speaker 11: were concerned that the language was not completely straightforward and
[30:29] Speaker 11: that there were some really difficult issues of interpreting what
[30:33] Speaker 11: the statute meant. Justice Kavanaugh went so far as to
[30:36] Speaker 11: say this was a very close case, that there were
[30:38] Speaker 11: good arguments on both sides. Some of the more liberal
[30:42] Speaker 11: justices pointed to the legislative history, and the legislative history
[30:45] Speaker 11: actually indicates that Congress thought that there would be an
[30:48] Speaker 11: implied right of action, And there were some reports senate
[30:52] Speaker 11: in house reports which said that the envisioned investors could sue.
[30:56] Speaker 11: But a lot of the more conservative justices, as you
[30:58] Speaker 11: may know, they don't really like to look at legislative history.
[31:01] Speaker 11: They like to look at the text of the statute,
[31:04] Speaker 11: and so a lot of the oral argument was puzzling
[31:07] Speaker 11: through how we read this language. That's basically what the
[31:11] Speaker 11: argument was mainly about.
[31:13] Speaker 2: I thought it was interesting that Justice Sodomayor prefaced her
[31:16] Speaker 2: remarks about the statutory history by saying, I know many
[31:21] Speaker 2: of my colleagues don't believe in statutory history. She also
[31:25] Speaker 2: referred to these private lawsuits as being in conjunction with
[31:30] Speaker 2: the SEC's enforcement efforts. But if you have private investors
[31:35] Speaker 2: bringing their own lawsuits, does that interfere with the SEC's
[31:40] Speaker 2: enforcement plans.
[31:42] Speaker 11: Definitely. The mutual fund industry has taken the position that
[31:46] Speaker 11: the statute is meant to be enforced by the SEC
[31:49] Speaker 11: rather than private plaintiffs, and that the SEC can come
[31:53] Speaker 11: in if there's a violation of the Investment Company Act
[31:55] Speaker 11: and bring various enforcement actions. And you know, I think
[32:00] Speaker 11: the response to that is the SEC has limited resources.
[32:03] Speaker 11: There are a lot of these mutual funds out there,
[32:05] Speaker 11: a lot of potential violations, and having private attorney generals
[32:10] Speaker 11: who are able to bring these suits maybe a more
[32:12] Speaker 11: effective way of enforcing these provisions. That was not really
[32:17] Speaker 11: discussed much in the oral argument. I think that argument
[32:20] Speaker 11: has fallen a bit out of favor with the more
[32:22] Speaker 11: conservative justices, but definitely the mutual fund industry believes that
[32:27] Speaker 11: it's really the sec that should be bringing enforcement actions
[32:31] Speaker 11: in this space.
[32:32] Speaker 2: What about suing in state court rather than federal court.
[32:36] Speaker 2: Here's what Justice Kavanaugh said, So.
[32:38] Speaker 5: It's a federal court state court issue. As I see it,
[32:41] Speaker 5: like this is going to happen. It's just going to
[32:43] Speaker 5: happen in federal court or state court.
[32:45] Speaker 11: There is also a lot of discussion about that possibility
[32:50] Speaker 11: that maybe what the statute means is that the contract
[32:55] Speaker 11: is unenforceable if there's a violation of the Investment Company Act,
[32:59] Speaker 11: and so then there would be litigation in state court
[33:02] Speaker 11: about the enforceability of the contract, And so that was
[33:06] Speaker 11: seen as a possibility. Have there ever been suits like that.
[33:10] Speaker 11: I don't know, and I think there would be a
[33:12] Speaker 11: little bit complicated, you know, especially the types of theories
[33:16] Speaker 11: that you might want to bring. Federal courts may have
[33:20] Speaker 11: a bit of an advantage over state courts in hearing
[33:22] Speaker 11: these types of issues, and so it would be a
[33:26] Speaker 11: bit awkward to say that these claims would mainly be
[33:29] Speaker 11: brought in state court as opposed to Federal Court if
[33:32] Speaker 11: you want to have this be an effective remedy in
[33:34] Speaker 11: my view.
[33:35] Speaker 2: Jim, can you give us a sort of simplistic explanation
[33:39] Speaker 2: of the position of each side here on the merits
[33:42] Speaker 2: of the case.
[33:43] Speaker 11: On one side, the investors might argue, we need some remedy,
[33:47] Speaker 11: we need a clear remedy when there are violations, and
[33:51] Speaker 11: you know, recision is a pretty powerful remedy under the
[33:54] Speaker 11: Investment Company Act, which was meant to regulate mutual funds.
[33:57] Speaker 11: On the other hand, I think what the mutual fund
[33:59] Speaker 11: in as worried about is that you're going to get
[34:01] Speaker 11: a flood of lawsuits and that that might actually be
[34:05] Speaker 11: bad for most investors in the mutual fund because only
[34:09] Speaker 11: a few investors might be interested, insuing, I'm only a
[34:12] Speaker 11: few investors may be pursuing an activist strategy with the fund,
[34:17] Speaker 11: and so the other investors may not be all that interested,
[34:21] Speaker 11: and it's costly to defend these lawsuits, and those costs
[34:25] Speaker 11: come out of the pockets of the other mutual fund shareholders.
[34:30] Speaker 2: It was hard to read the argument, although it did
[34:32] Speaker 2: seem like the liberal justices and perhaps the Chief Justice
[34:36] Speaker 2: and Justice Kavanaugh, might favor allowing the private lawsuits. But
[34:42] Speaker 2: what was your take?
[34:43] Speaker 11: It's close. I mean, my guess is I actually think
[34:47] Speaker 11: that they will find that there is a right of
[34:49] Speaker 11: action based upon the text of the statute. I think
[34:52] Speaker 11: there is enough in the text of the statute to
[34:57] Speaker 11: persuade at least some of the conservative justices. Is that
[35:00] Speaker 11: Congress intended for there to be a private right of
[35:04] Speaker 11: action for recision, I think the more liberal justices will
[35:08] Speaker 11: be persuaded by both the text, the legislative history, and
[35:11] Speaker 11: policy considerations. So I think they'll need to get a
[35:15] Speaker 11: couple of the Republican justices to decide with them, which
[35:19] Speaker 11: I think is very possible. It's not a sure thing,
[35:21] Speaker 11: but just my sense of the argument. If I felt
[35:24] Speaker 11: like Saba Capital might have had a bit of a
[35:26] Speaker 11: better argument in terms of the text on the statutory
[35:29] Speaker 11: interpretation issue.
[35:30] Speaker 2: And do you think that it's the correct decision to
[35:33] Speaker 2: allow the private investors to.
[35:34] Speaker 11: Sue As a policy matter, I think the risk that
[35:38] Speaker 11: it's going to lead to a flood of lawsuits may
[35:41] Speaker 11: be low. We'll have to see though. And my colleague
[35:44] Speaker 11: at UCLA for non Restreppo, actually has a study that
[35:47] Speaker 11: he just completed that looked at what happened after the
[35:50] Speaker 11: second Circuit allowed these lawsuits, and he didn't find a
[35:53] Speaker 11: flood of cases, and he didn't find a big impact
[35:56] Speaker 11: on the mutual fund industry. These are preliminary results, he
[35:59] Speaker 11: tells me, and so he may, you know, find something
[36:01] Speaker 11: different as he delves into the data. My sense is that,
[36:05] Speaker 11: you know, SABA Capital is a little bit of an
[36:06] Speaker 11: outlier in terms of pursuing a strategy like this. Most
[36:11] Speaker 11: activist funds are targeting public corporations rather than mutual funds. Now,
[36:17] Speaker 11: it might be that if you know you have more
[36:18] Speaker 11: rights and more leverage, that more funds may get into
[36:21] Speaker 11: this space. But it is a strategy that does require
[36:24] Speaker 11: you to make a pretty substantial investment in the mutual
[36:28] Speaker 11: funds so that you have significant votes. And it's a
[36:31] Speaker 11: little bit different than some of the shareholder lawsuits we
[36:34] Speaker 11: see with public companies, which have been criticized because you know,
[36:38] Speaker 11: you have plainers who own only a few shares who
[36:40] Speaker 11: have a right to bring a private action represented by
[36:44] Speaker 11: an attorney in a class action, and so that might
[36:47] Speaker 11: be the reason we see a lot of litigation in
[36:50] Speaker 11: the public company space. I don't know if that will
[36:53] Speaker 11: necessarily be true with respect to mutual funds. And you know,
[36:58] Speaker 11: the other thing to keep in mind is the imply
[37:00] Speaker 11: right of action is also just for recision, which means
[37:03] Speaker 11: the remedy as you get your money back, as opposed
[37:05] Speaker 11: to damages. That may also have some impact on the
[37:08] Speaker 11: incentives of plaintiffs to bring a lot of lawsuits for
[37:12] Speaker 11: violations of the Investment company Acts.
[37:14] Speaker 2: What's an investor lawsuit without damages? Thanks so much, Jim.
[37:18] Speaker 2: That's Professor James Park of UCLA Law School. And that's
[37:22] Speaker 2: it for this edition of The Bloomberg Law Show. Remember
[37:25] Speaker 2: you can always get the latest legal news on our
[37:27] Speaker 2: Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,
[37:31] Speaker 2: and at www dot Bloomberg dot com, slash podcast, Slash Law,
[37:37] Speaker 2: and remember to tune into The Bloomberg Law Show every
[37:39] Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso
[37:43] Speaker 2: and you're listening to Bloomberg

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