August 29, 2025 • 38 mins
June Grasso talks to leading experts about the top legal stories of the week.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg Law.
Speaker 3 (00:10):
Congress can have no say in making an office independent.
Speaker 4 (00:12):
I think all agencies need a degree of autonomy. It
really tests whether the amendments to the law have.
Speaker 2 (00:19):
Keith interviews with prominent attorneys and Bloomberg legal experts.
Speaker 5 (00:23):
Joining me is Constitutional law professor David Super, Bloomberg News,
Supreme Court reporter Greg Store.
Speaker 2 (00:28):
And analysis of important legal issues, cases and headlines. Apples
of Waltgarden.
Speaker 4 (00:33):
They don't license their technology.
Speaker 3 (00:35):
That is a valid basis to dismiss the case.
Speaker 2 (00:38):
Bloomberg Law with June Grosso from Bloomberg Radio.
Speaker 5 (00:45):
Welcome to the Bloomberg Law Show. I'm June Grosso. Ahead
in this hour, President Trump's battle with the Fed escalates
into an emergency court hearing. Can Trump jail protesters who
burn the American flag? And the Supreme Court allows the
administration to do what it wants again. It's an unprecedented
(01:14):
legal battle that could reshape the Federal Reserve's longstanding political independence.
President Trump is the first president in history to try
to oust a sitting FED governor. Trump says he's firing
Lisa Cook, the first black woman to serve as a
FED governor because she committed mortgage fraud by listing homes
(01:35):
in both Michigan and Georgia as her primary residence is
when she got mortgages in twenty twenty one.
Speaker 1 (01:42):
She seems to have had an infraction, and she can't
have an infraction, especially that infraction, because she's in charge of,
if you think about it, mortgages, and we need people
that are one hundred percent above board.
Speaker 5 (01:55):
Cook is fighting back by filing a lawsuit saying Trump
doesn't have the power to remove her from office and
that he violated the federal law that allows him to
remove a FED governor only for cause. Cook's lawsuit is
a major escalation in the growing clash between the White
House and the FED, which has resisted Trump's demands for
(02:16):
lower interest rates. It presents novel issues and will almost
certainly end up at the Supreme Court. It's just a
matter of when. Cook is seeking an emergency in junction
to block her firing and confirm her status as a
member of the Fed's governing board. Federal Judge Ga Cobb
held an emergency hearing on Friday, but her decision isn't
(02:39):
likely until next week or perhaps even later joining me
is Bloomberg Intelligence senior litigation analyst Elliott Stein. Elliot tell
us about Cook's arguments for why Trump can't fire her
for these mortgage fraud allegations that took place before she
became a Fed governor.
Speaker 6 (02:57):
Well, the first argument is that the four cause requirement
hasn't been met. And their argument is that cause requires
more than mere allegations on truth's social that you know,
you look to the Humphreys executor's standard, which is that
there has to be some sort of inefficiency, neglective duty,
(03:19):
or malfeasance in office. These allegations don't rise. So that
and in any event, she wasn't given an opportunity to
be heard on this and to contest the allegations. End
is that she has a right to receive notice of
the accusations and to contest them.
Speaker 5 (03:36):
And is the administration's main argument that basically the president
is the president and the courts have to defer to him.
Speaker 6 (03:45):
Yeah, that's a lot of it. I mean, their argument
first is that the statutory text only refers to cause,
it doesn't refer to inefficiency, neglective duty, or malfeasance in office,
So that gives him a broader removal authority, and then
there's also nothing in the statute. The case law is
their argument that a court can even review that determination.
(04:05):
That the statute gives the president the right to determine
if there was cause, and that's not reviewable, and that
there's also nothing about giving the person the notice or
an opportunity to be heard. And in fact, the case law,
they argue, goes against Liza Cook's argument on that. And
if notice was required, she got noticed because she was
aware for several days about these allegations before she was
(04:27):
actually terminated, and she never tried to rebut the allegations factually,
and in that event, you know, a hearing. This is
the government's argument. The hearing seems like it would be
unnecessary because she hasn't even contested the allegations and given
a reason for why these documents would have been filled
out in the way that they were.
Speaker 5 (04:47):
The only sort of explanation she gave in her papers
was that there might have been an unintentional clerical error
in her mortgage application, a mislabeling, but no real life
explanation beyond that. And as far as the administration's claimed
that Trump's truth, social posts constituted notice of the allegations.
(05:09):
Judge Cobbs said to the government's lawyer, you're not suggesting
what happened would satisfy due process requirements, and he replied
that he was.
Speaker 6 (05:19):
Yeah. Their argument is that the truth Social posts do
provide sufficient notice, and as a result, if notice is required,
they satisfied it. And Abby Lowell had a sort of
funny line, you know, he said, notice shouldn't require having
to sign up for truth Social in order to see
(05:39):
the president's truth Social posts directly. And Abbie Lowell's argument is,
you know, it has to be something a little more
formal than that, not necessarily, you know, full blown investigation,
but some opportunity to butt the allegations.
Speaker 5 (05:55):
In May, the Supreme Court blocked the reinstatement of nlr
the and Merit Systems Protection Board commissioners while their suits
played out, and did the same for Consumer Product Safety
Commission heads in July. So was there an argument that
this judge should follow that precedent here?
Speaker 6 (06:15):
That did come up in a few contexts, one of
which was the irreparable harm argument, because you know, Lisa
Cook's argument is that if she can't continue to serve
on the Federal Reserve Board while the litigation plays out,
she'll be irreparably harmed because you know, she's unable to
perform her duties that she was appointed and confirmed to perform.
And the government cited all these cases, including Wilcox right
(06:37):
where the NRB and the Emerit Systems Protection Board commissioners
were not reinstated by the Supreme Court while those cases
played out, And you know, the government argued those cases
stand for the proposition that it's harmful to the president
if you know he's unable to perform his statutory duties
to remove federal officers. You know, the Wilcos case. Really
(06:58):
it's a good example of how it can be by
both sides to support their argument.
Speaker 5 (07:02):
But a different factor here is the independence of the
Fed and that was a highlight of Cook's complaint. Did
it play in the hearing as well.
Speaker 6 (07:12):
Judge cob herself alluded to it. It came up obviously
several times in Abby Lowell's arguments as well. And I
think you know it's relevant because the Supreme Court in
May and Wilcox sort of alluded to it in the
sense that the Federal Reserve is more of a quasi
private uniquely structured institution, whereas so much of the case
(07:34):
law deals with agencies, some of which don't even exist anymore.
The cases are from more than one hundred years ago,
so the context may be a little different. We'll just
see how much that actually matters to the various judges
that are going to hear this.
Speaker 5 (07:46):
This was an emergency hearing. What turned it into not
so much of an emergency?
Speaker 6 (07:52):
Yeah, well, where one side seeks a TRO a temper
or restaining order, but they're only good if they're granted.
They're only good for like ten days, maybe two weeks,
and then the party has to seek a preliminary injunction
in order to basically keep the status quo in place
for the rest of the litigation. And what often happens
I think is probably going to happen here is because
(08:14):
the issues are so similar per a tro and a
preliminary junction, the parties don't want to have to go
through the same motions twice. So the way the court
left it was that they're going to finish briefing the
tro on Tuesday at Leasta Cook will file her reply
to the President Trump's papers, and in the meantime, the
parties will talk about potentially basically converting the tro motion
(08:37):
to a preliminary in junction motion again, because the issues
basically are the same, and it would just allow the
ruling to stay in place longer, and it would allow
the rulining to be appealed.
Speaker 5 (08:48):
We're at a very early stage of this litigation, But
after the hearing, do you think Trump or Cook has
the edge?
Speaker 6 (08:59):
Well, this is such a close case. I think President
Trump has very good arguments based on the text of
the Federal Reserve Act, which only says for cause and
doesn't say anything more than that case law. I think
also in large measure helps President Trump. But you have
to overlay over all that that we're talking about the
(09:22):
Federal Reserve here, and the Supreme Court in the Wilcox
decision in May, went out of its way to distinguish
the Federal Reserve when it comes to a lot of
these issues, and so much of the case law that
is being discussed deals with agencies that really fall more
clearly under executive authority. So it's going to really be
(09:43):
up to the various courts that are going to hear
this to decide how much they want to distinguish the
Federal Reserve from all that precedent, and you know, I
think Judge Cobb alluded to that. You know, she said
she has to map Federal Reserve independence over all these issues.
To me, that suggests Lisa Cook has a good shot
at winning before Judge Cobb, at least at this early stage.
(10:07):
And then you know, from there, we'll go up to
the DC Circuit and then the Supreme Court, and we'll
see how they deal with their Wilcox decision. From May
Elliott tell.
Speaker 5 (10:16):
Us what the fed's response to the lawsuit has been.
Speaker 6 (10:20):
The FED is sort of staying silent and not picking
aside and saying they'll bide by any court decision, which
is why Lisa Cook's complaint names the Federal Reserve Board governors,
both collectively and in their individual capacity as defendants, along
with FED chair J. Powell.
Speaker 5 (10:37):
Explain why timing might be important for Trump here in.
Speaker 6 (10:41):
The near term. You have an FMC meeting in mid September,
right where everyone's expecting some sort of rate cuts. It
seems I actually don't think that's the most important date
because for that date, Lisa Cook is just one seat
on the FMC out of twelve. In July, when they
met and they did at lower rates. You only had
two dissenting votes, So I don't think her vote is
(11:02):
necessarily going to sway anything in September. But to me,
the more important dates to keep in mind are the
end of February, when the Federal Reserve Board gets to
reappoint or block reappointment of the regional Federal Reserve Bank
presidents who rotate onto the FOMC. So if the President
(11:23):
can elst least a cook by February, he essentially on
the Federal Reserve Board will have three sympathetic votes and
on the other side, you'd have three votes you know
that probably don't align with the President Powell, Michael Barr,
and Vice Jared Jefferson, and you wouldn't have all these
other Regional Reserve Bank presidents who for the most part
(11:45):
have been voting consistently with Jay Powell against lowering rates.
So you know, February is important because it starts to
potentially change the composition of the FOMC in a direction
that's more fai or both to President Trump.
Speaker 5 (12:01):
And Trump is continuing to fire board members. On Wednesday,
he fired one of two Democratic members of the US
Service Transportation Board to break a two to two tie
before the board considers the largest railroad merger ever proposed.
Speaker 6 (12:18):
You know, I think the hallmark of this when the
history books are written, is its efforts to expand executive
authority over almost every aspect of the government. You know,
we do have this Supreme Court decision in May that
suggested the Federal Reserve is a little different. We'll sort
of see how that plays out.
Speaker 5 (12:35):
Thanks, Elliot. That's Bloomberg Intelligence senior litigation analyst Elliott Stein.
Coming up next. Trump wants to jail flag burners. I'm
June Grosso. When you're listening to Bloomberg.
Speaker 2 (13:00):
This is Bloomberg Law with June Grossel from Bloomberg Radio, and.
Speaker 7 (13:07):
What the penalty is going to be. If you burn
a flag, you get one year in jail, no early exits,
no nothing. You get one year in jail. If you're
burn a flag, you get And what it does is
insight to write it.
Speaker 5 (13:21):
President Trump signed an executive order on Monday directing the
US Attorney General to prosecute people for burning the American flag.
But flag burning is protected under the First Amendment under
well settled Supreme Court precedence. In fact, none other than
the late Justice Antonin Scalia, a conservative icon, was part
(13:44):
of the majority in the nineteen eighty nine case that
established that the Constitution protects burning the flag as a
form of symbolic speech.
Speaker 8 (13:53):
Yeah, if I were king, I would not allow people
to go about burning the American flag. However, we have
a First Amendment which says that the right of free
speech shall not be abridged, and it is addressed in
particular to speech critical of the government. I mean that
was the main kind of speech that tyrants would seek
(14:14):
to suppress. Burning the flag is a form of expression.
Speaker 5 (14:19):
Trump call the justices who made that decision a quote
very sad court. And the order directs the Attorney General
to pursue litigation to challenge that. Nineteen eighty nine President,
you get.
Speaker 7 (14:32):
One year in jail, and it goes on your record,
and you will see flag burning stopping immediately.
Speaker 5 (14:38):
But just two hours later, a combat veteran burned an
American flag across the street from the White House to
protest the executive order targeting flag burning.
Speaker 6 (14:50):
I'm burning flag the progress that illegal fast as president,
that's sits.
Speaker 9 (14:56):
In that house.
Speaker 5 (14:57):
My guest is David Cole, a professor at Georgetown law.
He represented the men who burned the flags in the
two leading Supreme Court cases. David, there's a long history
in this country of desecrating or burning the flag as
a form of political protest that goes back to the
Civil War. But states and even Congress have passed laws
(15:20):
to prevent flag burning. Tell us about the Seminole case
the Supreme Court decided in nineteen eighty nine, where you
represented Gregory Lee Johnson.
Speaker 3 (15:29):
Sure so. Gregory Johnson burned an American flag in Dallas, Texas,
in a protest outside of the Republican National Convention that year,
and was prosecuted under a Texas statute that made it
a crime to burn the flag in a way that
would deeply offend onlookers. He was convicted in the trial court.
(15:52):
That conviction was overturned by the highest court in Texas,
but Texas took the case up to the Supreme Court,
and the Supreme Court in Texas versus Johnson, ruled that
the government may not criminalize expression through the burning of
a flag simply because people find that message offensive.
Speaker 5 (16:13):
It was a five to four decision, but it didn't
divide the court down ideological lines. In fact, conservative icon
Justice Antonin Scalia was in the majority. Why do you
think it didn't go down ideological lines?
Speaker 3 (16:27):
So that's a great question. We won the case with
the votes of two Republican appointees, Justice Kennedy and Justice Scalia.
Both of them, I think, you know, over time, showed
themselves to be committed to the First Amendment. Justice Stevens
also a committed First Amendment. Justice dissented. I think in
his case it came down to the fact that he
(16:49):
was a veteran World War Two. He clearly was deeply
offended by the very practice of burning a flag and
therefore dissented. But over time, I think, you know, if
you look back at the cases that preceded Texas sersus. Johnson,
many justices, including liberal justices, expressed some reservation about whether
(17:12):
or not flag burning should be protected by the First Amendment.
So it's not something that has divided the country along
partisan lines.
Speaker 5 (17:20):
And will you explain the thinking of the justices in
the majority and in the descent.
Speaker 3 (17:25):
So the majority held that the justification for throwing someone
in jail for burning the flag is that the message
sent by engaging in that conduct is offensive. And the
court held that under the First Amendment. The government has
to maintain neutrality in the field of expression. Can't punish
(17:49):
speech simply because it or a majority of people find
a particular message to be offensive. Once you go down
that road, virtually anything can be prohibited by the government
because one man's offense is another man's truth. The dissent argued, well,
this is really not so essential a form of expression.
(18:12):
Chief Justice Rank was called flag burning quote an inarticulate grunt.
And there's a very powerful interest in preserving the unity
that the symbol expresses, and therefore states should be permitted
to prescribe how people can use the flag. They can
waive it, but they can't burn it.
Speaker 5 (18:34):
So President Trump is also with this executive order calling
for Attorney General Pam Bondi to pursue litigation to challenge
the Supreme Court's ruling in nineteen eighty nine. This Supreme
Court is very different from that Supreme Court. Do you
think that they would still uphold the president.
Speaker 3 (18:54):
Yes, this court is different from the court from nineteen
eighty nine to nineteen ninety but if anything, an even
stronger pro First Amendment court and Texas versus Johnson is
not just the kind of one off It is cited
again and again and again for this basic premise, probably
the most fundamental premise of pre speech law, which is
(19:17):
the fact that speech offends somebody is not a justification
for the government to throw the speaker in jail. And
that's ultimately what punishing flag burners is about. It's about
throwing them in jail because we would be, you know,
very pleased if they waive the flag. We are very
upset if they burn the flag. But either way, you
(19:38):
are using the flag to express a message, and the
government is not allowed to tell us what messages we
can and cannot express through symbolic speech or otherwise.
Speaker 5 (19:49):
Now, Trump's executive order doesn't direct the Attorney General to
prosecute those who burn flags for the flag burning itself,
but it says the Justice this Department should bring cases
quote against acts of American flag desecration that violate applicable
content neutral laws while causing harm unrelated to expression, consistent
(20:12):
with the First Amendment. So the cases are going to
be limited to those where there's a violation of other laws.
Speaker 3 (20:21):
So this executive order is I suppose, as befitting something
that is ultimately about symbols, almost entirely symbolic because it acknowledges,
as it must, that the Supreme Court has decisively ruled
that you can't punish someone for burning a flag. And
what it does is says, well, there may be some
circumstances in which one could where the reason you're engaged
(20:46):
in the prosecution is not the burning of the flag
per se, but some other interests altogether. So, for example,
many towns and cities prohibit burning of anything in public
without a permit. You can't burn leaves, you can't burn
wood in public without a permit. That law can be
(21:06):
applied to the burning of an American flag because the
law is not about speech. It's not about what burning
a flag communicates. It's an environmental law or fire safety
law that is neutral as to speech. And it's long
been the case that that kind of law. In fact,
the Supreme Court is said that kind of law would
be perfectly permissible. It is very rare that that is
(21:29):
sphasis for a flag desecration prosecution. However, and the other
example that Trump puts forth these as well, if somebody
burned a flag in such a way as it constituted
incitement to imminent lawless action or fighting words, those are
not protected by the First Amendment. Even pure speech, if
it constitutes incitement to eminent law of action or fighting words,
(21:52):
is not protected by the First Amendment. So if flag
burning fell into those very, very narrow categories, you could
probably that's true, but sort of trivial and largely irrelevant,
because people burn flags not to engage in fighting words,
not to incite some imminent lawless action, but to protest
(22:14):
what the American government is doing. That's why they burn flags,
and that is exactly why flag desecration laws were enacted,
and that the Supreme Court is held is an impermissible
justification for targeting any form of speech. So, yeah, if
you come up with a case, and I've not seen
one in my entire lifetime where someone burns a flag
(22:37):
in order to send a signal to some group that
is steeled to action to engage in illegal conduct, well sure,
just as you could criminalize that person from raising his
hand to incite that lawless action, you could penalize burning
a flag if it's being used for that purpose. But
(22:58):
it's really a null set And so I think at
the end of the day, Trump's executive order is itself
a kind of a nullity. It's a political act. It's
not going to have any real world effects, and it's
essentially theater engaged in by the president. Because it's good politics.
It's easy to be on the side of condemning the
(23:20):
burning of the American flag. That's why Democrats and Republicans
have done that for a long time. That's why forty
nine state legislatures voted to amend the Constitution after Texas
versus Johnson and the United States versus Aikman, and the
amendment effort only failed by a few votes in the Senate.
Because the easy political act is to condemn these kinds
(23:44):
of expressions. The hard thing, the courageous thing, is to
protect them, even if we find them, and even because
we find them detestable and offensive.
Speaker 5 (23:53):
A combat veteran burned a flag outside the White House
on Monday in protest of Trump's executive order targeting flag burning.
He was detained by Secret Service for igniting an object,
then turned over the US Park Police and arrested. He
was issued two citations, not for burning the flag, but
(24:13):
for setting a fire in an unsecured place and for
damaging park property. Does he have a defense that he's
being selectively prosecuted or is that a straightforward citation?
Speaker 3 (24:27):
So I think in the absence of Trump's executive order,
it would be a straightforward citation. That is, of course,
the federal government is permitted to ban burning things on
federal property, and it can ban burning flags along with
burning leaves or anything else on federal property, and that
wouldn't raise a serious First Amendment objection even if someone
(24:48):
burned a flag for protest. But now that Trump has
issued this executive order and basically announced as the president
I states, I am directing the Justice Department to prosecute
flag Why because flag burning expresses an offensive message that
essentially gives this protester evidence of selective prosecution. He can
(25:11):
introduce as exhibit A in his defense the fact that
the President announced the day before he was arrested that
the government would target people who burn flags using other laws,
but doing so because the President disapproves of the message
that is sent. And so he now has a defense
(25:31):
that he wouldn't have had had the President not issued
that executive order.
Speaker 5 (25:35):
And he already has a lawyer and says he welcomes
the legal challenge. Thanks so much, David. That's Georgetown law
professor David Cole coming up next. The Supreme Court hands
Trump another victory. I'm June GROSSEO. When you're listening to Bloomberg.
Speaker 2 (25:52):
This is Bloomberg Law with June Grossel from Bloomberg Radio.
Speaker 9 (25:58):
I ordered the end to all of the lawless diversity
equity and inclusion nonsense policies across the government and all
across the private sector and the military.
Speaker 5 (26:10):
President Trump has tried to wipe out diversity, equity and
inclusion programs in both the public and private sectors, and
early this year, the National Institutes of Health began terminating
thousands of medical research grants that don't align with the
president's policies. On DEI, more than a dozen states researchers, universities,
(26:32):
and public health organizations sued, saying the cuts would set
back crucial research by years, if not decades. They won
at the district court level and at the appellate court level,
but the Supreme Court, in a five to four decision,
sided with the Trump administration, clearing the way for it
to cut nearly eight hundred million dollars in medical research grants.
(26:56):
While legal battles over the funding play out in the
lower courts, sorts joining me is constitutional law expert David super,
a professor at Georgetown Law. David what kinds of grants
were cut here?
Speaker 4 (27:09):
The administration canceled thousands of grants the NIH had provided
for research on a wide range of topics. Ostensibly, these
grants were cut off because they related to diversity, equity,
and inclusion, or because they related to gender or gender
(27:34):
identity as understood by the administration. In fact, it took
little more than having the word diversity or equity in
the name of the project to get it cut off.
Some projects that had nothing to do with race or
racial equity or racial inclusion were cut off, but the
(27:56):
district court found that disproportionately research into health problems that
affect people of color were target of this cutoff.
Speaker 5 (28:05):
Federal Judge William Young, a Reagan appointee, said, following a
bench trial, this represents racial discrimination and discrimination against America's
LGBTQ community. I would be blind not to call it out.
Speaker 6 (28:18):
Yes.
Speaker 4 (28:19):
He also found that the cutoffs showed remarkable insensitivity to
the health problems affecting women.
Speaker 5 (28:28):
In the past, have administrations cut off grants for arbitrary
reasons or because they don't comply with the administration's objectives.
Speaker 4 (28:37):
This is almost unheard of. Sure, if someone is taking
a grant and they're not doing the work, they get
cut off. But the notion that we wouldn't have given
this grant, so we're simply going to cut it off
is extraordinarily wasteful, and administrations at both parties in the
past have refrained from doing it.
Speaker 5 (28:56):
Explain the Supreme Court's ruling, which was five to four.
Speaker 4 (29:00):
The question came to the Supreme Court whether to stay
whether to suspend the order that the District Court judge
had issued. And the District Court judge did two things.
He struck down the policy guidance the administration based its
terminations on, and it struck down the terminations. It fell
(29:22):
four justices, the three Liberals and the Chief Justice voted
to deny any interference with the District Court's order to
let the order take effect. Four justices voted to stay
the entirety of the court order, and the deciding vote
was cast by Justice Barrett, who said that she wanted
(29:45):
to stay the resumption of funding, but would not interfere
with the finding that the policy guidance was illegal.
Speaker 5 (29:55):
And what was the reasoning of the majority in all
allowing the government to withhold the grant money.
Speaker 4 (30:03):
Their reasoning was that anyone who'd had their grant cutoff
should have gone to the Court of Federal Claims, not
federal district court, and that's the place that it is
proper to pursue depths from the federal government.
Speaker 5 (30:19):
Will you explain why? Justice Barrett came down differently on
the nih cutting the grants and on the policy.
Speaker 4 (30:29):
Justice Barrett held that the federal district courts are completely
proper places to challenge the legality of guidance that is
issued by the administration. So if the challenge is that
this guidance is without solid legal basis, that it's contrary
to the federal government's legal obligations, that it violate civil
(30:51):
rights laws, those are proper claims to bring in federal
district court into get an injunction, she said. But she
said that if you actually we want money, that has
to come from the Court of Federal claim So.
Speaker 5 (31:04):
That means that the challenges here would have to go
to two separate courts and bring two separate actions.
Speaker 4 (31:10):
Yes, she said, there's precedent for that, and she asserted
that that was the result of Congress's passing the jurisdictional
statues they have and the Supreme Court's prior interpretations, the.
Speaker 5 (31:23):
Court of Federal Claims is, to say the least, not
well known. Do you think Barrett and the other four
Conservatives were right about its jurisdiction.
Speaker 4 (31:33):
No, I don't. The Court of Federal Claims is there
to handle a lot of routine matters where there's a
question about the quality of the paint job that was
done on a federal office building and the federal government's
refusing to pay, and the painting contractor wants to be paid.
There's a need for that, But that's very different from
(31:55):
a systematic violation of thousands of contract asserting a power
that has never previously been recognized. Those are the kinds
of statutory and constitutional issues that have long been the
province of the general federal court system, the district courts,
and the circuit courts of appeal.
Speaker 5 (32:16):
Can the groups here, now that they have this decision
on the policy, can they now go to the Court
of Federal Claims and get the money?
Speaker 4 (32:25):
If only it were that simple. This was not a
decision on the merits of those policies. It was simply
about how the litigation should proceed, and Justice Barrett, joining
with the Chief Justice and the three Liberals, held that
the litigation can continue in the first Circuit Court of
(32:46):
Appeals about whether or not those policy documents are legal,
and if they are struck down again in that court,
the Trump administration could appeal bater active Supreme Court on
the merits. She indicated that there were some open questions
in her mind that would need to be resolved before
(33:08):
a final decision could be made about the legitimacy of
those policy documents, so she was only keeping the litigation alive,
she wasn't resolving it in the favor of the challengers.
Speaker 5 (33:20):
And the majority found that the government would be irreparably
harmed if it had to pay out this money.
Speaker 4 (33:26):
How so, yes, that's a particularly disturbing part of it.
They said that because the recipients wouldn't be able to
repay the government if it was ultimately found that the
money was not owing, that the federal government shouldn't have
to pay out the money until after a final judgment
is issued, which, once appeals are accounted for, it could
(33:49):
take several years. This is treating the entire matter as
a debt collection issue rather than an issue of democratic governance.
It could be that at the end of the day,
the parties entitled to money will get some money, but
the research will long since has been abandoned, the employees
(34:10):
long since has been laid off. Many of the nonprofits
will have been bankrupted by the long delay. And this
is essentially saying that the federal government is too big
to comply rather than too big to fail. Too big
to comply because the size of the grants it gives
out and the importance of the grants it gives out
(34:31):
are such that the recipients don't have the money to
pay it back.
Speaker 5 (34:35):
Justice Neil Gorse had sort of scolded the lower court
judges here for not following the Supreme Court's emergency ruling
in April that allowed the Trump administration to cancel sixty
five million dollars in teaching grants. Quote. Lower court judges
may sometimes disagree with this Court's decisions, but they are
(34:56):
never free to defy them. He also complained about two
other strict courts not following Supreme Court rulings quote. So
this is now the third time in a matter of
weeks this Court has to intercede in a case squarely
controlled by one of its precedents. But he's referring to
rulings on the shadow docket where there aren't full briefings
(35:17):
or oral arguments or sometimes even opinions.
Speaker 4 (35:21):
Well, it's a very curious position they're taking. Most of
the history the Supreme Court has been through formal consideration
of cases, oral arguments, briefs, and thorough opinions from the justices.
Increasingly under the first Trump administration, the Bodi administration, and
(35:42):
now the Supreme Court is not accepting full briefs, not
listening to oral argument, not writing full opinion, sometimes not
writing any opinions at all. And what justice goursa you're
saying is, even when the Supreme Court is issuing an
emergency order, and even when it's not at all clear
what the basis for that order is, the lower courts
(36:03):
somehow must read the Supreme Court's mind. If the Supreme
Court wants lower courts to follow it, it needs to
tell them what it's doing.
Speaker 5 (36:11):
Chief Justice Roberts joined the liberals in the case involving
the teaching related grants. And in this case, is that
surprising in any respect?
Speaker 1 (36:21):
No.
Speaker 4 (36:22):
Chief Justice Roberts has been very concerned about business climate
and allowing businesses to function freely, and the federal government
that isn't bound to comply with its contract is very
bad for business. Throughout the country's history, contract has been
a central part of its law and the notion that
(36:42):
the government above all complies with its contracts. It's been central.
We have a new administration that doesn't want to and
rather than bringing it to heal, this court has been
over backwards to accommodate it. If I were a private
business person, I would be doing anything I could to
avoid having a contract with the federal government because the
(37:03):
effect of these decisions isn't The contract isn't worth anything.
Speaker 5 (37:07):
Is there any other avenue that the researchers and the
organizations and the states can pursue or is it just
the Court of Federal Claims?
Speaker 4 (37:17):
They can go to the Court of Federal Claims, there
are significant obstacles to getting relief from that court. It's
a real court. People do win real judgments there. I
don't mean to disparage it in that way, but it's
going to be a very difficult way to proceed. Lots
of money that is owed probably will never be ordered
to be paid out of that court, and the result
(37:41):
of all of this is likely to be that many
of these programs are indeed disbanded.
Speaker 5 (37:48):
Between this decision and the April decision. It's not good
news for those who have grants.
Speaker 4 (37:54):
This isn't really a liberal conservative thing. This is just
a rule of law thing. And if the govern it
doesn't have to keep its contracts, no one should do
business with it.
Speaker 5 (38:04):
It's always a pleasure, David, thanks so much. That's Professor
David Super of Georgetown Law. And that's it for this
edition of the Bloomberg Law Show. Remember you can always
get the latest legal news by listening to our Bloomberg
Law podcasts. You can find them on Apple Podcasts, Spotify,
and at Bloomberg dot com slash podcast Slash Law. I'm
(38:25):
June Grosso. Stay with us. Today's top stories and global
business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg Law.
Speaker 3 (00:10):
Congress can have no say in making an office independent.
Speaker 4 (00:12):
I think all agencies need a degree of autonomy. It
really tests whether the amendments to the law have.
Speaker 2 (00:19):
Keith interviews with prominent attorneys and Bloomberg legal experts.
Speaker 5 (00:23):
Joining me is Constitutional law professor David Super, Bloomberg News,
Supreme Court reporter Greg Store.
Speaker 2 (00:28):
And analysis of important legal issues, cases and headlines. Apples
of Waltgarden.
Speaker 4 (00:33):
They don't license their technology.
Speaker 3 (00:35):
That is a valid basis to dismiss the case.
Speaker 2 (00:38):
Bloomberg Law with June Grosso from Bloomberg Radio.
Speaker 5 (00:45):
Welcome to the Bloomberg Law Show. I'm June Grosso. Ahead
in this hour, President Trump's battle with the Fed escalates
into an emergency court hearing. Can Trump jail protesters who
burn the American flag? And the Supreme Court allows the
administration to do what it wants again. It's an unprecedented
(01:14):
legal battle that could reshape the Federal Reserve's longstanding political independence.
President Trump is the first president in history to try
to oust a sitting FED governor. Trump says he's firing
Lisa Cook, the first black woman to serve as a
FED governor because she committed mortgage fraud by listing homes
(01:35):
in both Michigan and Georgia as her primary residence is
when she got mortgages in twenty twenty one.
Speaker 1 (01:42):
She seems to have had an infraction, and she can't
have an infraction, especially that infraction, because she's in charge of,
if you think about it, mortgages, and we need people
that are one hundred percent above board.
Speaker 5 (01:55):
Cook is fighting back by filing a lawsuit saying Trump
doesn't have the power to remove her from office and
that he violated the federal law that allows him to
remove a FED governor only for cause. Cook's lawsuit is
a major escalation in the growing clash between the White
House and the FED, which has resisted Trump's demands for
(02:16):
lower interest rates. It presents novel issues and will almost
certainly end up at the Supreme Court. It's just a
matter of when. Cook is seeking an emergency in junction
to block her firing and confirm her status as a
member of the Fed's governing board. Federal Judge Ga Cobb
held an emergency hearing on Friday, but her decision isn't
(02:39):
likely until next week or perhaps even later joining me
is Bloomberg Intelligence senior litigation analyst Elliott Stein. Elliot tell
us about Cook's arguments for why Trump can't fire her
for these mortgage fraud allegations that took place before she
became a Fed governor.
Speaker 6 (02:57):
Well, the first argument is that the four cause requirement
hasn't been met. And their argument is that cause requires
more than mere allegations on truth's social that you know,
you look to the Humphreys executor's standard, which is that
there has to be some sort of inefficiency, neglective duty,
(03:19):
or malfeasance in office. These allegations don't rise. So that
and in any event, she wasn't given an opportunity to
be heard on this and to contest the allegations. End
is that she has a right to receive notice of
the accusations and to contest them.
Speaker 5 (03:36):
And is the administration's main argument that basically the president
is the president and the courts have to defer to him.
Speaker 6 (03:45):
Yeah, that's a lot of it. I mean, their argument
first is that the statutory text only refers to cause,
it doesn't refer to inefficiency, neglective duty, or malfeasance in office,
So that gives him a broader removal authority, and then
there's also nothing in the statute. The case law is
their argument that a court can even review that determination.
(04:05):
That the statute gives the president the right to determine
if there was cause, and that's not reviewable, and that
there's also nothing about giving the person the notice or
an opportunity to be heard. And in fact, the case law,
they argue, goes against Liza Cook's argument on that. And
if notice was required, she got noticed because she was
aware for several days about these allegations before she was
(04:27):
actually terminated, and she never tried to rebut the allegations factually,
and in that event, you know, a hearing. This is
the government's argument. The hearing seems like it would be
unnecessary because she hasn't even contested the allegations and given
a reason for why these documents would have been filled
out in the way that they were.
Speaker 5 (04:47):
The only sort of explanation she gave in her papers
was that there might have been an unintentional clerical error
in her mortgage application, a mislabeling, but no real life
explanation beyond that. And as far as the administration's claimed
that Trump's truth, social posts constituted notice of the allegations.
(05:09):
Judge Cobbs said to the government's lawyer, you're not suggesting
what happened would satisfy due process requirements, and he replied
that he was.
Speaker 6 (05:19):
Yeah. Their argument is that the truth Social posts do
provide sufficient notice, and as a result, if notice is required,
they satisfied it. And Abby Lowell had a sort of
funny line, you know, he said, notice shouldn't require having
to sign up for truth Social in order to see
(05:39):
the president's truth Social posts directly. And Abbie Lowell's argument is,
you know, it has to be something a little more
formal than that, not necessarily, you know, full blown investigation,
but some opportunity to butt the allegations.
Speaker 5 (05:55):
In May, the Supreme Court blocked the reinstatement of nlr
the and Merit Systems Protection Board commissioners while their suits
played out, and did the same for Consumer Product Safety
Commission heads in July. So was there an argument that
this judge should follow that precedent here?
Speaker 6 (06:15):
That did come up in a few contexts, one of
which was the irreparable harm argument, because you know, Lisa
Cook's argument is that if she can't continue to serve
on the Federal Reserve Board while the litigation plays out,
she'll be irreparably harmed because you know, she's unable to
perform her duties that she was appointed and confirmed to perform.
And the government cited all these cases, including Wilcox right
(06:37):
where the NRB and the Emerit Systems Protection Board commissioners
were not reinstated by the Supreme Court while those cases
played out, And you know, the government argued those cases
stand for the proposition that it's harmful to the president
if you know he's unable to perform his statutory duties
to remove federal officers. You know, the Wilcos case. Really
(06:58):
it's a good example of how it can be by
both sides to support their argument.
Speaker 5 (07:02):
But a different factor here is the independence of the
Fed and that was a highlight of Cook's complaint. Did
it play in the hearing as well.
Speaker 6 (07:12):
Judge cob herself alluded to it. It came up obviously
several times in Abby Lowell's arguments as well. And I
think you know it's relevant because the Supreme Court in
May and Wilcox sort of alluded to it in the
sense that the Federal Reserve is more of a quasi
private uniquely structured institution, whereas so much of the case
(07:34):
law deals with agencies, some of which don't even exist anymore.
The cases are from more than one hundred years ago,
so the context may be a little different. We'll just
see how much that actually matters to the various judges
that are going to hear this.
Speaker 5 (07:46):
This was an emergency hearing. What turned it into not
so much of an emergency?
Speaker 6 (07:52):
Yeah, well, where one side seeks a TRO a temper
or restaining order, but they're only good if they're granted.
They're only good for like ten days, maybe two weeks,
and then the party has to seek a preliminary injunction
in order to basically keep the status quo in place
for the rest of the litigation. And what often happens
I think is probably going to happen here is because
(08:14):
the issues are so similar per a tro and a
preliminary junction, the parties don't want to have to go
through the same motions twice. So the way the court
left it was that they're going to finish briefing the
tro on Tuesday at Leasta Cook will file her reply
to the President Trump's papers, and in the meantime, the
parties will talk about potentially basically converting the tro motion
(08:37):
to a preliminary in junction motion again, because the issues
basically are the same, and it would just allow the
ruling to stay in place longer, and it would allow
the rulining to be appealed.
Speaker 5 (08:48):
We're at a very early stage of this litigation, But
after the hearing, do you think Trump or Cook has
the edge?
Speaker 6 (08:59):
Well, this is such a close case. I think President
Trump has very good arguments based on the text of
the Federal Reserve Act, which only says for cause and
doesn't say anything more than that case law. I think
also in large measure helps President Trump. But you have
to overlay over all that that we're talking about the
(09:22):
Federal Reserve here, and the Supreme Court in the Wilcox
decision in May, went out of its way to distinguish
the Federal Reserve when it comes to a lot of
these issues, and so much of the case law that
is being discussed deals with agencies that really fall more
clearly under executive authority. So it's going to really be
(09:43):
up to the various courts that are going to hear
this to decide how much they want to distinguish the
Federal Reserve from all that precedent, and you know, I
think Judge Cobb alluded to that. You know, she said
she has to map Federal Reserve independence over all these issues.
To me, that suggests Lisa Cook has a good shot
at winning before Judge Cobb, at least at this early stage.
(10:07):
And then you know, from there, we'll go up to
the DC Circuit and then the Supreme Court, and we'll
see how they deal with their Wilcox decision. From May
Elliott tell.
Speaker 5 (10:16):
Us what the fed's response to the lawsuit has been.
Speaker 6 (10:20):
The FED is sort of staying silent and not picking
aside and saying they'll bide by any court decision, which
is why Lisa Cook's complaint names the Federal Reserve Board governors,
both collectively and in their individual capacity as defendants, along
with FED chair J. Powell.
Speaker 5 (10:37):
Explain why timing might be important for Trump here in.
Speaker 6 (10:41):
The near term. You have an FMC meeting in mid September,
right where everyone's expecting some sort of rate cuts. It
seems I actually don't think that's the most important date
because for that date, Lisa Cook is just one seat
on the FMC out of twelve. In July, when they
met and they did at lower rates. You only had
two dissenting votes, So I don't think her vote is
(11:02):
necessarily going to sway anything in September. But to me,
the more important dates to keep in mind are the
end of February, when the Federal Reserve Board gets to
reappoint or block reappointment of the regional Federal Reserve Bank
presidents who rotate onto the FOMC. So if the President
(11:23):
can elst least a cook by February, he essentially on
the Federal Reserve Board will have three sympathetic votes and
on the other side, you'd have three votes you know
that probably don't align with the President Powell, Michael Barr,
and Vice Jared Jefferson, and you wouldn't have all these
other Regional Reserve Bank presidents who for the most part
(11:45):
have been voting consistently with Jay Powell against lowering rates.
So you know, February is important because it starts to
potentially change the composition of the FOMC in a direction
that's more fai or both to President Trump.
Speaker 5 (12:01):
And Trump is continuing to fire board members. On Wednesday,
he fired one of two Democratic members of the US
Service Transportation Board to break a two to two tie
before the board considers the largest railroad merger ever proposed.
Speaker 6 (12:18):
You know, I think the hallmark of this when the
history books are written, is its efforts to expand executive
authority over almost every aspect of the government. You know,
we do have this Supreme Court decision in May that
suggested the Federal Reserve is a little different. We'll sort
of see how that plays out.
Speaker 5 (12:35):
Thanks, Elliot. That's Bloomberg Intelligence senior litigation analyst Elliott Stein.
Coming up next. Trump wants to jail flag burners. I'm
June Grosso. When you're listening to Bloomberg.
Speaker 2 (13:00):
This is Bloomberg Law with June Grossel from Bloomberg Radio, and.
Speaker 7 (13:07):
What the penalty is going to be. If you burn
a flag, you get one year in jail, no early exits,
no nothing. You get one year in jail. If you're
burn a flag, you get And what it does is
insight to write it.
Speaker 5 (13:21):
President Trump signed an executive order on Monday directing the
US Attorney General to prosecute people for burning the American flag.
But flag burning is protected under the First Amendment under
well settled Supreme Court precedence. In fact, none other than
the late Justice Antonin Scalia, a conservative icon, was part
(13:44):
of the majority in the nineteen eighty nine case that
established that the Constitution protects burning the flag as a
form of symbolic speech.
Speaker 8 (13:53):
Yeah, if I were king, I would not allow people
to go about burning the American flag. However, we have
a First Amendment which says that the right of free
speech shall not be abridged, and it is addressed in
particular to speech critical of the government. I mean that
was the main kind of speech that tyrants would seek
(14:14):
to suppress. Burning the flag is a form of expression.
Speaker 5 (14:19):
Trump call the justices who made that decision a quote
very sad court. And the order directs the Attorney General
to pursue litigation to challenge that. Nineteen eighty nine President,
you get.
Speaker 7 (14:32):
One year in jail, and it goes on your record,
and you will see flag burning stopping immediately.
Speaker 5 (14:38):
But just two hours later, a combat veteran burned an
American flag across the street from the White House to
protest the executive order targeting flag burning.
Speaker 6 (14:50):
I'm burning flag the progress that illegal fast as president,
that's sits.
Speaker 9 (14:56):
In that house.
Speaker 5 (14:57):
My guest is David Cole, a professor at Georgetown law.
He represented the men who burned the flags in the
two leading Supreme Court cases. David, there's a long history
in this country of desecrating or burning the flag as
a form of political protest that goes back to the
Civil War. But states and even Congress have passed laws
(15:20):
to prevent flag burning. Tell us about the Seminole case
the Supreme Court decided in nineteen eighty nine, where you
represented Gregory Lee Johnson.
Speaker 3 (15:29):
Sure so. Gregory Johnson burned an American flag in Dallas, Texas,
in a protest outside of the Republican National Convention that year,
and was prosecuted under a Texas statute that made it
a crime to burn the flag in a way that
would deeply offend onlookers. He was convicted in the trial court.
(15:52):
That conviction was overturned by the highest court in Texas,
but Texas took the case up to the Supreme Court,
and the Supreme Court in Texas versus Johnson, ruled that
the government may not criminalize expression through the burning of
a flag simply because people find that message offensive.
Speaker 5 (16:13):
It was a five to four decision, but it didn't
divide the court down ideological lines. In fact, conservative icon
Justice Antonin Scalia was in the majority. Why do you
think it didn't go down ideological lines?
Speaker 3 (16:27):
So that's a great question. We won the case with
the votes of two Republican appointees, Justice Kennedy and Justice Scalia.
Both of them, I think, you know, over time, showed
themselves to be committed to the First Amendment. Justice Stevens
also a committed First Amendment. Justice dissented. I think in
his case it came down to the fact that he
(16:49):
was a veteran World War Two. He clearly was deeply
offended by the very practice of burning a flag and
therefore dissented. But over time, I think, you know, if
you look back at the cases that preceded Texas sersus. Johnson,
many justices, including liberal justices, expressed some reservation about whether
(17:12):
or not flag burning should be protected by the First Amendment.
So it's not something that has divided the country along
partisan lines.
Speaker 5 (17:20):
And will you explain the thinking of the justices in
the majority and in the descent.
Speaker 3 (17:25):
So the majority held that the justification for throwing someone
in jail for burning the flag is that the message
sent by engaging in that conduct is offensive. And the
court held that under the First Amendment. The government has
to maintain neutrality in the field of expression. Can't punish
(17:49):
speech simply because it or a majority of people find
a particular message to be offensive. Once you go down
that road, virtually anything can be prohibited by the government
because one man's offense is another man's truth. The dissent argued, well,
this is really not so essential a form of expression.
(18:12):
Chief Justice Rank was called flag burning quote an inarticulate grunt.
And there's a very powerful interest in preserving the unity
that the symbol expresses, and therefore states should be permitted
to prescribe how people can use the flag. They can
waive it, but they can't burn it.
Speaker 5 (18:34):
So President Trump is also with this executive order calling
for Attorney General Pam Bondi to pursue litigation to challenge
the Supreme Court's ruling in nineteen eighty nine. This Supreme
Court is very different from that Supreme Court. Do you
think that they would still uphold the president.
Speaker 3 (18:54):
Yes, this court is different from the court from nineteen
eighty nine to nineteen ninety but if anything, an even
stronger pro First Amendment court and Texas versus Johnson is
not just the kind of one off It is cited
again and again and again for this basic premise, probably
the most fundamental premise of pre speech law, which is
(19:17):
the fact that speech offends somebody is not a justification
for the government to throw the speaker in jail. And
that's ultimately what punishing flag burners is about. It's about
throwing them in jail because we would be, you know,
very pleased if they waive the flag. We are very
upset if they burn the flag. But either way, you
(19:38):
are using the flag to express a message, and the
government is not allowed to tell us what messages we
can and cannot express through symbolic speech or otherwise.
Speaker 5 (19:49):
Now, Trump's executive order doesn't direct the Attorney General to
prosecute those who burn flags for the flag burning itself,
but it says the Justice this Department should bring cases
quote against acts of American flag desecration that violate applicable
content neutral laws while causing harm unrelated to expression, consistent
(20:12):
with the First Amendment. So the cases are going to
be limited to those where there's a violation of other laws.
Speaker 3 (20:21):
So this executive order is I suppose, as befitting something
that is ultimately about symbols, almost entirely symbolic because it acknowledges,
as it must, that the Supreme Court has decisively ruled
that you can't punish someone for burning a flag. And
what it does is says, well, there may be some
circumstances in which one could where the reason you're engaged
(20:46):
in the prosecution is not the burning of the flag
per se, but some other interests altogether. So, for example,
many towns and cities prohibit burning of anything in public
without a permit. You can't burn leaves, you can't burn
wood in public without a permit. That law can be
(21:06):
applied to the burning of an American flag because the
law is not about speech. It's not about what burning
a flag communicates. It's an environmental law or fire safety
law that is neutral as to speech. And it's long
been the case that that kind of law. In fact,
the Supreme Court is said that kind of law would
be perfectly permissible. It is very rare that that is
(21:29):
sphasis for a flag desecration prosecution. However, and the other
example that Trump puts forth these as well, if somebody
burned a flag in such a way as it constituted
incitement to imminent lawless action or fighting words, those are
not protected by the First Amendment. Even pure speech, if
it constitutes incitement to eminent law of action or fighting words,
(21:52):
is not protected by the First Amendment. So if flag
burning fell into those very, very narrow categories, you could
probably that's true, but sort of trivial and largely irrelevant,
because people burn flags not to engage in fighting words,
not to incite some imminent lawless action, but to protest
(22:14):
what the American government is doing. That's why they burn flags,
and that is exactly why flag desecration laws were enacted,
and that the Supreme Court is held is an impermissible
justification for targeting any form of speech. So, yeah, if
you come up with a case, and I've not seen
one in my entire lifetime where someone burns a flag
(22:37):
in order to send a signal to some group that
is steeled to action to engage in illegal conduct, well sure,
just as you could criminalize that person from raising his
hand to incite that lawless action, you could penalize burning
a flag if it's being used for that purpose. But
(22:58):
it's really a null set And so I think at
the end of the day, Trump's executive order is itself
a kind of a nullity. It's a political act. It's
not going to have any real world effects, and it's
essentially theater engaged in by the president. Because it's good politics.
It's easy to be on the side of condemning the
(23:20):
burning of the American flag. That's why Democrats and Republicans
have done that for a long time. That's why forty
nine state legislatures voted to amend the Constitution after Texas
versus Johnson and the United States versus Aikman, and the
amendment effort only failed by a few votes in the Senate.
Because the easy political act is to condemn these kinds
(23:44):
of expressions. The hard thing, the courageous thing, is to
protect them, even if we find them, and even because
we find them detestable and offensive.
Speaker 5 (23:53):
A combat veteran burned a flag outside the White House
on Monday in protest of Trump's executive order targeting flag burning.
He was detained by Secret Service for igniting an object,
then turned over the US Park Police and arrested. He
was issued two citations, not for burning the flag, but
(24:13):
for setting a fire in an unsecured place and for
damaging park property. Does he have a defense that he's
being selectively prosecuted or is that a straightforward citation?
Speaker 3 (24:27):
So I think in the absence of Trump's executive order,
it would be a straightforward citation. That is, of course,
the federal government is permitted to ban burning things on
federal property, and it can ban burning flags along with
burning leaves or anything else on federal property, and that
wouldn't raise a serious First Amendment objection even if someone
(24:48):
burned a flag for protest. But now that Trump has
issued this executive order and basically announced as the president
I states, I am directing the Justice Department to prosecute
flag Why because flag burning expresses an offensive message that
essentially gives this protester evidence of selective prosecution. He can
(25:11):
introduce as exhibit A in his defense the fact that
the President announced the day before he was arrested that
the government would target people who burn flags using other laws,
but doing so because the President disapproves of the message
that is sent. And so he now has a defense
(25:31):
that he wouldn't have had had the President not issued
that executive order.
Speaker 5 (25:35):
And he already has a lawyer and says he welcomes
the legal challenge. Thanks so much, David. That's Georgetown law
professor David Cole coming up next. The Supreme Court hands
Trump another victory. I'm June GROSSEO. When you're listening to Bloomberg.
Speaker 2 (25:52):
This is Bloomberg Law with June Grossel from Bloomberg Radio.
Speaker 9 (25:58):
I ordered the end to all of the lawless diversity
equity and inclusion nonsense policies across the government and all
across the private sector and the military.
Speaker 5 (26:10):
President Trump has tried to wipe out diversity, equity and
inclusion programs in both the public and private sectors, and
early this year, the National Institutes of Health began terminating
thousands of medical research grants that don't align with the
president's policies. On DEI, more than a dozen states researchers, universities,
(26:32):
and public health organizations sued, saying the cuts would set
back crucial research by years, if not decades. They won
at the district court level and at the appellate court level,
but the Supreme Court, in a five to four decision,
sided with the Trump administration, clearing the way for it
to cut nearly eight hundred million dollars in medical research grants.
(26:56):
While legal battles over the funding play out in the
lower courts, sorts joining me is constitutional law expert David super,
a professor at Georgetown Law. David what kinds of grants
were cut here?
Speaker 4 (27:09):
The administration canceled thousands of grants the NIH had provided
for research on a wide range of topics. Ostensibly, these
grants were cut off because they related to diversity, equity,
and inclusion, or because they related to gender or gender
(27:34):
identity as understood by the administration. In fact, it took
little more than having the word diversity or equity in
the name of the project to get it cut off.
Some projects that had nothing to do with race or
racial equity or racial inclusion were cut off, but the
(27:56):
district court found that disproportionately research into health problems that
affect people of color were target of this cutoff.
Speaker 5 (28:05):
Federal Judge William Young, a Reagan appointee, said, following a
bench trial, this represents racial discrimination and discrimination against America's
LGBTQ community. I would be blind not to call it out.
Speaker 6 (28:18):
Yes.
Speaker 4 (28:19):
He also found that the cutoffs showed remarkable insensitivity to
the health problems affecting women.
Speaker 5 (28:28):
In the past, have administrations cut off grants for arbitrary
reasons or because they don't comply with the administration's objectives.
Speaker 4 (28:37):
This is almost unheard of. Sure, if someone is taking
a grant and they're not doing the work, they get
cut off. But the notion that we wouldn't have given
this grant, so we're simply going to cut it off
is extraordinarily wasteful, and administrations at both parties in the
past have refrained from doing it.
Speaker 5 (28:56):
Explain the Supreme Court's ruling, which was five to four.
Speaker 4 (29:00):
The question came to the Supreme Court whether to stay
whether to suspend the order that the District Court judge
had issued. And the District Court judge did two things.
He struck down the policy guidance the administration based its
terminations on, and it struck down the terminations. It fell
(29:22):
four justices, the three Liberals and the Chief Justice voted
to deny any interference with the District Court's order to
let the order take effect. Four justices voted to stay
the entirety of the court order, and the deciding vote
was cast by Justice Barrett, who said that she wanted
(29:45):
to stay the resumption of funding, but would not interfere
with the finding that the policy guidance was illegal.
Speaker 5 (29:55):
And what was the reasoning of the majority in all
allowing the government to withhold the grant money.
Speaker 4 (30:03):
Their reasoning was that anyone who'd had their grant cutoff
should have gone to the Court of Federal Claims, not
federal district court, and that's the place that it is
proper to pursue depths from the federal government.
Speaker 5 (30:19):
Will you explain why? Justice Barrett came down differently on
the nih cutting the grants and on the policy.
Speaker 4 (30:29):
Justice Barrett held that the federal district courts are completely
proper places to challenge the legality of guidance that is
issued by the administration. So if the challenge is that
this guidance is without solid legal basis, that it's contrary
to the federal government's legal obligations, that it violate civil
(30:51):
rights laws, those are proper claims to bring in federal
district court into get an injunction, she said. But she
said that if you actually we want money, that has
to come from the Court of Federal claim So.
Speaker 5 (31:04):
That means that the challenges here would have to go
to two separate courts and bring two separate actions.
Speaker 4 (31:10):
Yes, she said, there's precedent for that, and she asserted
that that was the result of Congress's passing the jurisdictional
statues they have and the Supreme Court's prior interpretations, the.
Speaker 5 (31:23):
Court of Federal Claims is, to say the least, not
well known. Do you think Barrett and the other four
Conservatives were right about its jurisdiction.
Speaker 4 (31:33):
No, I don't. The Court of Federal Claims is there
to handle a lot of routine matters where there's a
question about the quality of the paint job that was
done on a federal office building and the federal government's
refusing to pay, and the painting contractor wants to be paid.
There's a need for that, But that's very different from
(31:55):
a systematic violation of thousands of contract asserting a power
that has never previously been recognized. Those are the kinds
of statutory and constitutional issues that have long been the
province of the general federal court system, the district courts,
and the circuit courts of appeal.
Speaker 5 (32:16):
Can the groups here, now that they have this decision
on the policy, can they now go to the Court
of Federal Claims and get the money?
Speaker 4 (32:25):
If only it were that simple. This was not a
decision on the merits of those policies. It was simply
about how the litigation should proceed, and Justice Barrett, joining
with the Chief Justice and the three Liberals, held that
the litigation can continue in the first Circuit Court of
(32:46):
Appeals about whether or not those policy documents are legal,
and if they are struck down again in that court,
the Trump administration could appeal bater active Supreme Court on
the merits. She indicated that there were some open questions
in her mind that would need to be resolved before
(33:08):
a final decision could be made about the legitimacy of
those policy documents, so she was only keeping the litigation alive,
she wasn't resolving it in the favor of the challengers.
Speaker 5 (33:20):
And the majority found that the government would be irreparably
harmed if it had to pay out this money.
Speaker 4 (33:26):
How so, yes, that's a particularly disturbing part of it.
They said that because the recipients wouldn't be able to
repay the government if it was ultimately found that the
money was not owing, that the federal government shouldn't have
to pay out the money until after a final judgment
is issued, which, once appeals are accounted for, it could
(33:49):
take several years. This is treating the entire matter as
a debt collection issue rather than an issue of democratic governance.
It could be that at the end of the day,
the parties entitled to money will get some money, but
the research will long since has been abandoned, the employees
(34:10):
long since has been laid off. Many of the nonprofits
will have been bankrupted by the long delay. And this
is essentially saying that the federal government is too big
to comply rather than too big to fail. Too big
to comply because the size of the grants it gives
out and the importance of the grants it gives out
(34:31):
are such that the recipients don't have the money to
pay it back.
Speaker 5 (34:35):
Justice Neil Gorse had sort of scolded the lower court
judges here for not following the Supreme Court's emergency ruling
in April that allowed the Trump administration to cancel sixty
five million dollars in teaching grants. Quote. Lower court judges
may sometimes disagree with this Court's decisions, but they are
(34:56):
never free to defy them. He also complained about two
other strict courts not following Supreme Court rulings quote. So
this is now the third time in a matter of
weeks this Court has to intercede in a case squarely
controlled by one of its precedents. But he's referring to
rulings on the shadow docket where there aren't full briefings
(35:17):
or oral arguments or sometimes even opinions.
Speaker 4 (35:21):
Well, it's a very curious position they're taking. Most of
the history the Supreme Court has been through formal consideration
of cases, oral arguments, briefs, and thorough opinions from the justices.
Increasingly under the first Trump administration, the Bodi administration, and
(35:42):
now the Supreme Court is not accepting full briefs, not
listening to oral argument, not writing full opinion, sometimes not
writing any opinions at all. And what justice goursa you're
saying is, even when the Supreme Court is issuing an
emergency order, and even when it's not at all clear
what the basis for that order is, the lower courts
(36:03):
somehow must read the Supreme Court's mind. If the Supreme
Court wants lower courts to follow it, it needs to
tell them what it's doing.
Speaker 5 (36:11):
Chief Justice Roberts joined the liberals in the case involving
the teaching related grants. And in this case, is that
surprising in any respect?
Speaker 1 (36:21):
No.
Speaker 4 (36:22):
Chief Justice Roberts has been very concerned about business climate
and allowing businesses to function freely, and the federal government
that isn't bound to comply with its contract is very
bad for business. Throughout the country's history, contract has been
a central part of its law and the notion that
(36:42):
the government above all complies with its contracts. It's been central.
We have a new administration that doesn't want to and
rather than bringing it to heal, this court has been
over backwards to accommodate it. If I were a private
business person, I would be doing anything I could to
avoid having a contract with the federal government because the
(37:03):
effect of these decisions isn't The contract isn't worth anything.
Speaker 5 (37:07):
Is there any other avenue that the researchers and the
organizations and the states can pursue or is it just
the Court of Federal Claims?
Speaker 4 (37:17):
They can go to the Court of Federal Claims, there
are significant obstacles to getting relief from that court. It's
a real court. People do win real judgments there. I
don't mean to disparage it in that way, but it's
going to be a very difficult way to proceed. Lots
of money that is owed probably will never be ordered
to be paid out of that court, and the result
(37:41):
of all of this is likely to be that many
of these programs are indeed disbanded.
Speaker 5 (37:48):
Between this decision and the April decision. It's not good
news for those who have grants.
Speaker 4 (37:54):
This isn't really a liberal conservative thing. This is just
a rule of law thing. And if the govern it
doesn't have to keep its contracts, no one should do
business with it.
Speaker 5 (38:04):
It's always a pleasure, David, thanks so much. That's Professor
David Super of Georgetown Law. And that's it for this
edition of the Bloomberg Law Show. Remember you can always
get the latest legal news by listening to our Bloomberg
Law podcasts. You can find them on Apple Podcasts, Spotify,
and at Bloomberg dot com slash podcast Slash Law. I'm
(38:25):
June Grosso. Stay with us. Today's top stories and global
business headlines are coming up right now.
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