Episode Transcript
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Welcome to TeleForm, a podcast ofthe Federal Society's Practice Groups. I'm Nate
Kasmarrick, Vice President and Director ofPractice Groups at the Federal Society. For
exclusive access to live recordings and practicegroup TeleForm programs, become a Federal Society
member today at fedsock dot org.Hello, and welcome to a seat at
the sitting Today. Our great panelof legal experts will preview the December Supreme
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Court docket in ninety minutes or less. I'm Nate Chasmeric, Vice President and
Director of the Practice Groups for theFederal Society. As always, please note
that all opinions expressed on this programbelong to our guests at night the Society.
We are delighted to welcome Stephanie Maloneyto the program as our manator.
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Stephanie, I take it you survivedThanksgiving unscathed. How are you good,
Nate, how are you very well? Thank you? Delighted to have you
with us. Stephanie is the Chiefof Staff and Associate Chief Council for the
US Chamber Litigation Center, which isthe litigation arm of the US Chamber of
Commerce. Prior to work at theLitigation Center, she served as Chief of
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Staff and Council in the Environment andNatural Resources Division of the Department of Justice.
Prior to that, she was anassociate in the Appellate and Critical Motions
Practice Group at Winston and Strawn.She clerked for Judge Edith Brown Clement of
the US Court of Appeals for theFifth Circuit and Judge Stephen J. Murphy,
the Third of the US District Courtfor the Eastern District of Michigan.
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Stephanie's lot agrees from Notrebany and herundergraduate is from Loyola University. A more
complete bile for Stephanie and the impressivebackrounds of all our guests are available for
your review on our website FEDSOC dotorg. Once our panel has reviewed and
discussed all the UPco upcoming cases forDecember, we'll go to audience Q and
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A, So please do think ofthe questions you'd like to ask them.
Questions can be submitted via the zoomQ and A function and we will do
our best to answer as many ofthe questions as we can. With that,
Stephanie, thank you again very much. The floor is yours. Thank
you, Nate. I think ofall the backgrounds, yours is quite impressive.
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So I'm glad to see the holidaydidn't disrupt your carefully placed books on
your shelf in today's competition. Thankyou. It's really a pleasure to be
with you all this afternoon, moderatingthe December edition of A Seat at the
Sitting. The Supreme Court is closingout twenty twenty three with seven cases calendared
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for argument between this week and next, and the justices really haven't let themselves
off easy for this holiday season.There are a few big arguments teed up
for this session, including what couldbe really landmark tax, banker, see
and admin law cases, along withcases that concern criminal law, immigration,
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and Title seven. And we're reallyprivileged to have a great panel of experts
with us to break it all down. So in alphabetical order, I'll just
briefly introduce each of our panelists,starting with Justin and Minetti. Justin is
an associate in Deckert's Trials, Investigationsand Securities Group. Before joining Deckert,
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he served as a law clerk toJudge Nichols on the US District Court for
the District of Columbia and to ChiefJudge Suton on the Sixth Circuit. Justin
is a graduate of the University ofVirginia Law School. Next, we're joined
by Audi dinar Addi is an attorneywith the Pacific Legal Foundation, where he
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focuses on separation of powers issues.He litigates regularly constitutional law cases in federal
and state courts across the country.And Audi earned his law degree from the
University of Toledo College of Law.In addition to our very capable practitioners,
we're rounding out today's panel with twoacademics. First is Jennifer Jenkins. Jennifer
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is an Associate professor of law atave Maria School of Law. She previously
served as an Army intelligence author inAfghanistan and Iraq. Before graduating from Harvard
Law School, Jennifer clerked for JudgeWinter on the Second Circuit and served as
a Supreme Court Fellow. Her scholarshipfocuses on criminal law and military law,
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with an emphasis on sentencing. Andfinally, we're joined by Lindsay Simon.
Lindsay is an associate professor of lawat Emory University Law School, where she
focuses her research on the bankruptcy system. Before joining the Emory faculty, Professor
Simon served as the Robert Cotton AllstonAssociate in Corporate Law at the University of
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Georgia School of Law, and sheserved as a law clerk to Judge Martin
on the Eleventh Circuit. Lindsay earnedher law degree from Northwestern So now onto
the discussion the part you've all joinedfor. Each of our panelists will cover
one of the cases in depth.We'll then have time for a discussion of
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the cases between the panelists before weopen the floor to questions from the audience.
As Nate said, please use theQ and A function to submit any
questions that you may have for ourspeakers, and don't be shy about raising
questions as we go. So tokick off our conversation, Jennifer will start
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and cover a pair of criminal lawcases, Brown versus United States and McElrath
versus Georgia, the first of whichwas actually argued this morning and the latter
of which is set for argument tomorrow. So Jenna, So, the first
case Brown the United States, concernsthe Armed Career Criminal Act, or otherwise
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known as the ACA. It's arecidivious statute that punishes people with a fifteen
year mandatory minimum sentence people who commita Federal Unlawful Firearms offense who have previously
committed three violent felonies, serious drugoffenses, or a combination of the two.
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In this case concerns the serious drugoffenses. This is a significant mandatory
minimum sentence because the offense or theunlawful federal unlawful weapons offense only provides a
ten year maximum penalty. Well,this is a fifteen year mandatory minimum if
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the AKA applies. And so thiscase concerns serious drug offenses, and the
Act defines various drug offenses as offenseseither under the Federal Controlled Substances Act or
more often they tend to be stateoffenses date drug offenses that involve a substance
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that is listed in the Federal Scheduleof Controlled Substances. And for both the
federal offenses and the state offenses,the maximum penalty for the offense must be
ten years or greater. And sothere's the question. Since these federal schedules,
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Congress is constantly taking drugs on andoff and moving drugs around in the
federal schedules. The question is atwhat moment in time does the court compare
the federal schedules and the substances onthe federal schedule with the substances under the
convicted under the state law. Andso there's really three reasonable possibilities, reasonable
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points in time where we might considerwhat the federal schedule provides. And so
the government contends that the federal scheduleshould be compared to the state drug offense
at the time when the state drugoffense, when that previous state drug offense
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was committed. But here one defendantsuggests that the court should compare the state
drug offense in the substance in thestate drug offense with the federal schedule at
the time of the f unlawful weaponsoffense was committed the unlawful firearms offense was
committed. And then another one ofthe defendants contends that the federal schedule should
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be compared. It should be thefederal schedule at the time that the defendant
is being sent in under the ACA. So there's three reasonable possibilities, and
all three of the parties, thetwo defendants and the government suggests that the
text indicates that the moment in timethat they propose should be the moment in
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time where the federal schedule is compared. And the government makes the point that
using the federal schedule at the timethe previous state drug offense was committed.
Serves the purpose of notice better forthe defendants because then the defendants, when
the defendant is pleading for a particularcharge, he will be aware of that
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collateral consequence of potentially being subject tothe ACA, because he canos at that
moment if his drug offense is onthe federal schedule or not. And so
really with any one of these possibilities, it can create disparate and disparate outcomes
for defendants where one defendant could besubject to a fifteen year mandatary minimum and
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another defense who commits the offense thenext day might not. And that all
depends on when, at what pointin time do we look at the federal
schedule. So it's a pretty interestingissue. And AKKA has been litigated heavily
through about many aspects of the Act, and so this is just one more
for AKKA. And then so movingon to mcelrathy, Georgia. So this
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case concerns the double jeopardy clause ofthe Fifth Amendment, which provides, nor
shall any person be subject for thesame offense to be twice put in jeopardy
of life or when and The questionthat this case is addressing is when does
jeopardy terminate in the double jeopardy clausebar prosecution. Georgia law distinguishes between two
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situations where a not guilty verdict conflictswith a simultaneously rendered guilty verdict. Georgia
courts call verdicts inconsistent when a juryrenders seemingly incompatible verdicts of guilty on one
charge and not guilty on another charge. But Georgia courts call verdicts repugnant when
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the jury makes affirmative findings shown onthe record that cannot logically or legally exist
at the same time. So here, Georgia prosecuted the defendant for malice murder,
felony murder, an aggravated assault,all based on a single incident in
which the defendant killed his adoptive mother. The defendant asserted an insanity defense to
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all of the charges. The juryfound the defendant not guilty of the malice
murder charge, but guilty on thefelony murder and aggravated assault charges. The
court found the verdicts repugnant because theacquittal on the malice murder charge rested on
the affirmative finding that the defendant wasinsane at the time of the alleged ax,
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while the verdicts on the other chargeswere based on the affirmative finding that
the defendant was not insane at thetime of the acts. The court explained
it's not legally possible for one tobe both insane and not insane during a
single criminal episode involving a single victim. And one reason that this makes a
big difference is that a defendant maynot challenge a conviction merely because it is
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inconsistent with an acquittal, but adefendant may challenge a conviction on the grounds
that is repugnant to an acquittal renderedat the same time. Georgia contends that
jeopardy terminate in so double jeopardy barsprosecution if the verdicts are merely inconsistent,
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but that a defendant may be retriedthe verdicts are repugnant. Here, the
defendant contends that repugnant is just anotherit's just another form of an inconsistent verdict,
and so it should not be constitutionallysignificant, and so defendant here should
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not be able to be retried onthe offenses of which aant contends he was
acquitted with this but these verdicts thatwere repugnant. However, the government contends
that it is up to states todetermine when a verdict is valid or invalid,
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and that jeopardy fails to terminate underrepugnant verdicts because those verdicts are invalid,
and it's really more akin to asituation where we have a mistrial or
a hung jury. And so thoseare the two sides for that case as
well the double jeopardy case in theAcca case. Thank you, Thank you,
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professor. Were you able to listento the Brown argument this morning?
Do we get any indication of howthat's going to come out? I was
not able to to hear the Brownag this morning, all right, So
maybe some of our participants listened inand can give us an up date.
Otherwise we'll have to listen for ourselvesnow that they're saving those Okay. Up
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next, we have Audie Dinah,who's going to provide us an overview of
I think one of the big hotbutton cases for this court's urn, which
is the sec versus jerk Cy case. Audi. Thank you, Stephanie,
and thank you to the participants forjoining us today. So, the Securities
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and Exchange Commission versus Jocracy case,as Stephanie said, is quite a blockbuster
case at the Supreme Court. Imean, you know, many times all
of the case blockbuster if they reachedthe Supreme Corporate this is maybe more blockbuster
than other cases. So this casearose when the Commission commenced a fraud prosecution
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against George Jocracy and his investment advisorwith a company called Patriot twenty eight LC.
At that point, and this wasmany years ago now, the Securities
and Exchange Commission had the option offiling suit in federal court or filing a
suit with its in house administrative lodjudge, and the Commission in the Jercracy
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case, selected to go and commenceprosecution with their own in house tribe.
You know. Now, the proceduralhistory of the case is somewhat complicated because
there was one round of appeals thatwent to the DC Circuit and back.
But essentially the first administrative lod judgehad issued an order of civil penalties of
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something around quarter billion, a disgorgementaward of something close to seven hundred thousand,
and a lifetime ban on Jocracy frompracticing in the financial sector. So
through the Appeace Jocassy went to thed C Circuit in the first round.
Meanwhile, the Supreme Court decided Lutiaversus Securities and Exchange Commission, so the
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case got remanded back for the Commissionto assign a new properly appointed administrative lodgers
to the case. So the secondadministrative Lodgudge, instead of sort of hearing
the case anew essentially adopted the decisionof the first administrative lodjudge again the same
thing civil penalties, disgorgement and alifetime industry bank. So that on appeal,
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Jocasy took that case to the FifthCircuit. So in the Fifth Circuit
it was judges l Rod, Davisand Oldham just Davis dissented and the issues
in the Fifth Circuit were three issues. The first issue was whether it deprives
private litigants of the right to ajury trial when administrative agencies bring them for
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litigation into their own in house tribunals. The second issue at the Fifth Circuit
was whether this sort of unfettered discretionthat the Commission has to choose to file
these suits either in federal court orwith their in house tribunals, whether that
unfettered discretion is a delegation of legislativepower to an agency without any guardrails,
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without any intelligible principle, such thatit violates the non delegation doctrine. The
third issue was whether the multiple layersof removal protection that are given to administrative
law judges in the Security and ExchangeCommission or one too many, and do
they violate the take care class AnArticle two of the US Constitution. On
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all three questions, Judge Land wrotethe majority opinion. Judge Davis dissented,
and all three of the questions weredecided in Jocas's favor. On the Seventh
Amendment jury trial Slash Article three question, the Court said, look, fraud
prosecutions are no different than common lawfraud. You know, common law fraud
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has existed for centuries. You basicallyhave to prove someone made a willful misrepresentation
and bad consequences followed. And thosecases, because they look no different than
common law fraud cases, those areprivate rights cases and they belong in actual
courts where the jury gets to decideall of the underlying facts of the dispute,
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and then the judge decides what conclusionsof law to reach, and then
it proceeds through the appeals as neededthrough the federal court system. On the
second question, the Fifth Circuit alsodecided in Jocrasy's favor. The court said
that this unfederate discretion given by Congressto the agency is legislative power, and
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it's legislative. How do we knowthat, Well, because Congress has selected
categories of cases and assigned them eitherto administrative adjudication or to actual federal courts.
So we see Congress time and timeagain making those decisions for itself.
So it has all of the sortof hallmarks of legislative authority when Congress,
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in historically speaking, has made thosedecisions. So what happens when Congress assigns
that sort of decision making to anadministrative agency. That is a delegation of
legislative power. So then the courtlooked at whether there was any intelligible principle
in the statutes to guide the agency'sexercise of that discretion, and finding none,
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the Fifth Circuit concluded that there wasa violation of the non delegation doctrine.
On the third question, uh,the Fifth Circuit again decided it in
Jockasi's favor. On the removal question, the UH. The issue is the
administrative law judges are removable by theheads of the agency, meaning the commissioners
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of the Security and Exchange Commission,for cause. So you can't just at
will fire an administrative law judge.If you are an SEC commissioner, you
have to you have to fire forcertain specified reasons in the statute. But
that's not the end of the matterateOnce once the Commission makes that determination,
the Meriage System Protection Board MSPB hasto find has to find good cause for
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that firing, and absent that goodcause, the UH the ALG cannot be
removed from office. Plus the membersof the Meritge System protect Action Board themselves
are only removable four caused by thePresident of the United States, So those
are multiple layers of The Fifth Circuitconcluded that are protecting the administrative law judges
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from the chain of command in whichthey belong the executive branch, and that
is impermissible under the take care Clauseand Article two of the Constitution. So
the Security and Exchange Commission having loston all three of those issues, the
SEC, through the Slicitor General's Office, filed a petition for CIRT with the
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Supreme Court, and as many practitionerswill tell you if the SG files assert
petition, the chances of it beinggranted can be pretty high. And that's
exactly what happened. The Court grantedcert. Now, the interesting thing was
there was there was sort of thislike issue number three and a half I
like to call it, where theFifth Circuit had said, after deciding in
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Charcasi's favor on all three of thequestions, that the case should be remanded
back to the to the Securities andExchange Commission for further proceedings. So,
in response to the SEC's CIRT petition, Jocasy filed a conditional cross CERCH petition
saying that this remanded question or thisremedies question should also be is also cert
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worthy and the Court should also grantcert on that question. But the Supreme
Court granted the secs CIRT petition anddenied Jocassy's conditional cross CIRT petition. And
it's curious because the Securities and ExchangeCommission to win has to win on all
three of the issues. And theword on the street is if if SEC
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loses on one of the issues,it essentially loses, because you know,
the at stake is the constitutionality ofadministrative adjudication. So at the Supreme Court,
SEC's arguing is sort of taking ahistorical look at the public rights versus
private rights distinction and is recommending thatthe Court draw the line to exclude fraud
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prosecutions from the private rights side ofthe equation. Meaning, from SEC's perspective,
if this is a matter of publicright, then it was constitutionally permissible
for Congress to assign a judication ofpublic rights cases in agency tribunals or an
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administrative tribunals. Jeocracy predictively argues thatno, these are private rights cases,
and there is there's sort of aninteresting and robust history of Supreme Court cases
that have struggled with a where todraw the line between private rights and public
rights. So we see a lotof that play out in the oral arguments
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that are coming up this Wednesday,the twenty eight. On the second issue,
the parties, aren't you spending alot of time on the non delegation
question? But again, predictively,the Commission is arguing that this is an
executive agency's exercise of executive power.So the SEC is characterizing this for categorizing
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this discretion to choose between in houseversus federal court as its exercise of prosecutorial
discretion. JOCES is arguing that thereis a difference between a decision of whether
to commence an action and where tocommence an action, and that's the analogy
that that's the distinction that the FifthCircuit also relied on. And essentially the
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distinction is, you know, herewe aren't dealing with the statue that let's
say, you know, a venueselection statue that says you could file a
case in not in District of Georgiaor in the Central District of California,
you know, depending on if theparty can be sued there for personal jurisdic
purposes. So it's not just selectingbetween one federal court and another federal court.
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It's selecting between an Article three tribunaland a non Article three tribunal.
So that's qualitatively a very different typeof venue selection than what occurs within the
federal system, within the federal courtsystem. So that's on the second question.
The third question removal, the Commissionis arguing that there aren't multiple layers
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of removal protection. There is essentiallyonly one. The Commission gets to decide
if there is cause to fire andthe administrative Lodguste. And if the Commission
decides that that's the only layer ofremoval protection there is, the Merit System
Protection Board simply confirms that there isa good cause for the Commission's decision to
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fire an inferior officer within their chainof command. Jacasi argues that no multiple
layers. There's at least three,and from past Supreme Court president, we
know that two layers are one toomany. So this is clearly as a
result of existing president. This isan Article two violation, So we expect
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the arguments to be quite robust.Given the recent trend of Justice Thomas asking
the first value of questions to arguingcouncil, it would be interesting to see
what Justice Thomas thinks is the isthe most sort of problematic question he needs
answered one of these three questions,the jury trial question, the non delegation
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question, or the removal question.And then there's that three and a half,
you know, the point five,the argument about remedies or remanded.
On the removal question, the Commissionis arguing that qualitatively, an appointments class
violation means that the officer who wasimproperly appointed could not have taken that official
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action to begin with, So it'ssort of like a void ab in istio
type of a remedy that fits anappointments clause violation. But the Commission argues
that a narrower remedy applies to aremoval violation because you know, the officer
that took the agency took action onbehalf of the agency was at least cloaked
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with proper appointment when that action wastaken. The removal sort of just comes
on the back end. So we'llsee what the Supreme Court does with that
argument. I hate to predict,but I think the Court has the option
of remanding back to the Fifth Circuitfor the Fifth Circuit to in the first
instance, decide the remand question.And again because the Court had the option
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of granting the conditional cross petition butit did not, that sort of,
you know, gives us some writingon the wall as to how the Court
will deal with the remedies question here. So that's the gist of the case
that's up for argument. I thinkit's a blockbuster case, and I'm sure
you know many practitioners are looking atit at specific legal foundation. We have
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many cases jocasy style cases that we'relitergating. So it's the implications for agency
adjudication and the continued validity of agencyadjudication is quite fascinating to observe. Thank
you, and back to you Stephanie. Thank you, Addie. Next up
we have a Professor Simon who isgoing to provide an update and overview of
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Harrington versus Purdue Pharma. Professor excellent, Thank you so much for having me,
and thanks to all of you forcoming and listening to a bit about
these cases. I'd say this caseis also a pretty blockbuster. It does
relate with bankruptcy, which you knowmany people may not have encountered. But
at core this is a case abouthow our legal systems deal with master words,
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and so we have the openary crisisthat I don't think you could escape
knowing about. Over the last fewyears. Purdue Pharma, manufacturer of oxy
if, was wrapped up in theopioid scandal and face litigation from individuals,
states, municipalities, cities, andso years ago they turned to bankruptcy because
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they you know, we're seeing thesecases go forward, and as with many
companies facing lots of litigation, theydidn't know what to do, so they
filed for bankruptcy. Like many otherChapter eleven cases involving mass towards, the
process moved along with various mediations,lots of different representations of different claimant groups
trying to get the best deal outof the case. Ultimately, bankruptcy is
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about helping a debtor resolve its affairsand getting a fresh start. So companies
facing trouble try to reorganize their affairs, tried to deal with all the different
claims, and the bankruptcy Code,which Congress drafted drafted, gives the bankruptcy
courts power were to help finally resolvethose claims in a deal. And so
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the most common way to resolve abankruptcy is through a plan of reorganization.
Purdue Pharma, through extended negotiation,put together a plan of reorganization and put
it before the bankruptcy court. Thisis all very common in Chapter eleven cases.
One thing that is not common inevery Chapter eleven case, or at
least doesn't get as much attention asit does here is the fact that this
Chapter eleven plan involved non debtters.So Purdue Pharma was run for a long
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time by members of the Sackler family. And there are many claims that the
Sackler family improperly or members of thefamily improperly conducted the affairs of Purdue Pharma,
took actions that violated various laws,took money out of the company.
All of these allegations are, youknow, the stuff of the lawsuits against
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them. So when Purdue Pharma filedfor bankruptcy, it didn't have a huge
pot of money to pay back itsclaimants. It's faked. But the Sacler
family did. And so part ofthis negotiation deal is that in exchange for
what we'll get to, which isthe Supreme Court's decision, in exchange for
what's called non debtor releases, theSacler family contributed billions of dollars into this
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global settlement. Now, in abankruptcy case, after a plan of the
organization is confirmed, the debtor,the company or individual that fills for bankruptcy
gets the benefit of discharging their liability. So no longer can you know,
the vast majority of claimants sue themonce the bankruptcies ended. This gives that
fresh start, this gives finality.That's how bankruptcy works well in the Produe
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Pharma case and in many other bankruptcies, non debtors like the Sacklers are getting
a similar type of benefit. Soin the future if this plan, if
this deal were approved, you couldno longer sue the Sacklers individually. You
would have to go and have yourclaims channeled into this structure of trusts and
that's where all that money would go. So basically, the Sackler family was
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contributing money in exchange for global peace, basically release of all the opioid claims
that the company would have against them, which were some very valuable claims,
probably the company's most valuable asset,but also the claims of individual claimants against
the Sacklers. Now this is thecontroversial part. You see, the bankruptcy
Code gives the court authority to dischargeliability against the debtor, it doesn't so
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expressly do that when the claims areagainst non debtors like the Sacklers. And
so the Supreme Court is hearing argumentsin this case to decide whether the bankruptcy
court had authority to confirm a bankruptcyplan that includes these non debtor releases.
They are very common in mass towortcases, especially in instances where there are
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multiple affiliates, not all of themmay need to file or want to file
bankruptcy, or when there are individuals, directors, officers, other involved parties
that are connected with the case thatmay want to get releases but don't really
want to file for bankruptcy for anynumber of rates. So the plan of
organization was confirmed by the bankruptcy judge, the district Court overturned it, saying
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that this authority is nowhere to befound in the bankruptcy Code. The second
Circuit on appeal reversed the District Courtand basically set out a test. Now
there's a circuit split around the countryabout whether these non debtor releases are permissible.
A number of circuits say no,not allowed without consent, meaning the
individual claimants have to agree to waivetheir claims against these non debtors going forward.
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The second Circuit joined the number ofcircuits that say yes, this is
permissible, and they created a multifactor test for when these sort of releases
are appropriate. And it's not aneasy test to get through, right,
It's a bit of a gauntlet,and the second Circuit made clear that's for
a good reason, because again,this is an extraordinary remedy and it really
should be when it's the only wayto get this sort of deal satisfied.
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Importantly, in between all of theappellate process, the amount that the Sacla
family is going to pay in exchangefor these releases has went up significantly.
Now it's somewhere near six billion dollars. And so the Supreme Court is facing
an interesting legal question, but alsoa bigger question behind the scenes, which
is what to do with these dealswhen there's really no better option. So
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legally, the question is if thecode is silent, does the number of
provisions of the Bankruptcy Code that thecourts have strung together supporting this, does
that give the bankruptcy court authority toissue this sort of relief? And that's
a question that comes up in manycontexts. We've been dealing with the Bankruptcy
Court's authority over decades, and Ithink it's one they'll continue to deal with.
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The argument before the Supreme Court isactually brought by the United States Trustee.
So the United States Trustee is technicallyan arm of the Department of Justice,
is designed as a watchdog of theprocess, and so basically they are
not objecting as a creditor. They'reobjecting as basically an overseer of the process
that has power to do so thatthis is just not allowed. Notably,
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just about everybody has settled and hasagreed to this deal. So again it
was a very complicated extracted negotiation,but ultimately the various states, municipalities,
groups of claimants, individuals all aroundthe country agreed that this is the deal
that they wanted because it gave themthe best chance of some recovery and getting
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something in some reasonable time. Yousee, the claims against the Sacklers were
subject to defenses like any claims mightbe, and even if the parties were
successful in getting judgments, a concernis that much of this money that was
allegedly taken out of perdu parma givento the various members of the family is
not recoverable, so it will bevery difficult and costly to try and do
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so, and that's a big challenge. And so anyway, the best majority
really everyone that supported or originally objectedto this is now supporting it. And
it's the United States Trustee on thebasis of the legal principle arguing before the
Supreme Court this should not happen.So that's generally what it is. It's
a question of does the court havethis authority? Do the code provisions that
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the parties look to does it allowthis. The one additional Rinka All point
out is that the Bankruptcy Code isn'tcompletely silent on this. There is a
provision section five twenty four G,which deals with mass toward cases and giving
this sort of non debta relief.Congress drafted it in response to a number
of cases before any of this wasreally in vogue. Asbestos cases filed for
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bankruptcy because you might imagine, inhindsight, there were not a lot of
redeeming business qualities for using asbestos,and so these companies face massive liability and
didn't really have much else to do, and so courts dealing with these cases
created the remedy that Congress later incorporatedinto five twenty four G. The challenge
with this Code provision is that it'sexpressly limited to asbestos cases, and here
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pretty pharma relates to the opioid crisis, so that's the backdrop. Happy to
answer more in the Q and Aas needed, but it will really change
how companies facingline ability look at bankruptcyas a potential avenue to deal with their
claims. Thank you, professor,You've managed to make bankruptcy interesting and accessible.
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So well done. Well done.Now the pressure is on for Justin
to do the same for a taxcase that the court is hearing. Justin
will cover more versus the United States. Justin, Thanks Epanie. Good morning
everyone. As you can see onin sunny California, it's lovely here.
So before jumping into the background ofthe case, I think we need to
(37:35):
do a little bit of level setting. So in our global economy, corporations
and individuals use overseas subsidiaries to engagein commerce and or earn revenue. This
is especially true for multinational corporations.Up until twenty seventeen, these subsidiaries revenue
went unpacked by the IRS until thosesubsidiaries distribut needed the gains back to the
(38:00):
United States. That changed in twentyseventeen and twenty seventeen Congress enacted the Tax
Cuts and Job Act, the socalled and with that, the so called
Mandatory Repatriation Tax the MRT for short, The MRT was passed to achieve a
one time windfall in tax revenue fromearnings that had been accumulated by foreign subsidiaries.
(38:25):
The MRT specifically deemed subsidiaries accumulated earningsto be income of whoever happened to
own a requisite number of shares ofthe foreign subsidiary. So with that background,
we can now pivot to the caseat hand. More and More Charles
and Kathleen More were hit with MRTliability because they owned shares of a foreign
(38:52):
corporation based in India that basically providedrural farmers with equipment. And the Moors
were using the revenue from this foreigncorporation and they were rolling it over into
the company. They were never distributingany of the earnings back to the United
States. So the IRS, withthe passage of the MRT, deemed them
(39:15):
liable for I think it was onehundred and thirty thousand or so in tax
liability. The Mores challenged the MRTand District Court on the grounds that the
tax conflicted with the sixteenth Amendment becausethe earnings that the foreign subsidiary kept within
it and kept reinvesting was not incomewithin the meaning of the sixteenth Amendment.
(39:38):
The District Court disagreed, and theMores appealed to the Ninth Circuit, which
also ruled against them. And Iquote the Ninth Circuit held that realization of
income is not a constitutional requirement forCongress to avail itself of the Sixteenth Amendments
exemption from the apportionment requirement for taxeson income. The Moors obviously petitioned to
(40:02):
the Supreme Court, and the SupremeCourt granted it. The Supreme Court and
the matter is going to have todecide whether income within the meaning of the
sixteenth Amendment requires realization. That determinationwill likely hinge on a close analysis of
corpus of information and material. Forinstance, the Court's going to be looking
(40:24):
at contemporary dictionary definitions, legal authoritiesfrom the time the Sixteenth Amendment was passed.
The text of the Sixteenth Amendment itselfpre ratification case law mostly from the
States, contemporary state statutes, federallaw that implemented the initial federal income tax
(40:47):
regime, and early Supreme Court caselaw. As Stephanie mentioned on the litigation,
associate at Deckert and we filed anamicust brief both at the sert stage
and at the merit stage, andone of our principal arguments is that the
original meaning of the word income inthe Sixteenth Amendment requires realization in essence income
(41:14):
has two elements to it. Ithas a gain and then that gain has
to be realized. So a realworld example might help illustrate the two elements.
Say that you purchase apple stock onJanuary first for one hundred dollars a
share, and then you go tosell that apple stock on December thirty first,
and that apple stock is now worthone hundred and twenty dollars. You
(41:37):
have gained twenty dollars, and thatsale on December thirty first is a realization
of that twenty dollars, and obviouslythe IRS could tax you for that twenty
dollars a realized gain. So thatis a basic understanding of what we think
income means within the within the sixteenthAmendment in terms of what you should be
(41:58):
looking at for for you know,interesting components of what the court could do.
One I think I think would be, you know, if the Court
dives deep into house states addressed themeaning of income at the time the sixteenth
Amendment was passed. Wisconsin in particular, was one of the first states to
enact a comprehensive income tax regime,and there's some interesting dialogue about the meaning
(42:22):
of income between Wisconsin state legislatures Anotherthing to be on the lookout for is
whether the theory of liquidation gets anyplay at the court. You know,
it's been it's been understood by thegeneral public since the passage of the sixteenth
Amendment that income requires realization, andwill be interesting to see whether the court
(42:45):
says that that you know, generallyunderstood meaning has been liquidated with time.
Another thing to be on the lookoutfor is story decisis. You know,
there's some Supreme Court cases from thenineteen twenties where it seems pretty clear that
the court held that income requires realization. There's a lot of debate in the
briefs about whether that in fact isa holding. But it's possible that the
(43:07):
Court just leans on these early casesand says that this case is decided by
story decisis. And then the othertwo things to keep in mind is just
what is the possible effects of thecourt's decision in this case, assuming that
they do reverse to Night Circuit Onewill be you know what other tax provisions
(43:27):
are on the chopping block, becauseyou know there are the irs is going
after unrealized gains. I'm not atax expert, so I can't really speak
to precisely what provisions might be atat hand, but I know there are
some. And then the other,the other big one is just how the
court words its decision, because ifyou're if you're following the news at all,
(43:49):
there's a lot of discussion in Congressabout possible wealth taxes, and it's
possible that if the Court, youknow, uses particular language in the opinion
that's rather broad, it could putan end to any potential it could kill,
you know, a potential wealth taxin the cradle. So those are
kind of the things I'd be onthe lookout for. But I'm happy to
(44:10):
answer any questions. And thanks againfor hearing me and the presentation. Thanks
justin. I think there are twomore cases that the Court is hearing the
sitting, so I'll just briefly coverthose before I open it up for discussion
amongst the panelists and our audience.As a reminder, if you have questions,
(44:34):
please submit those using the Q andA feature. I see a couple
questions already submitted, so please keepthose coming in. So just briefly two
more cases to cover for the sittingtomorrow, in addition to Michael Rath,
which Professor Jenkins covered The Court isalso going to hear argument in an immigration
case Wilkinson versus Garland. Just Briefly, under the Immigration and Nationality the Act,
(45:00):
the Attorney General has discretion to cancelremoval of a non permanent resident if
the non permanent resident meets for eligibilitycriteria. One of those criteria is that
the removal would result in quote exceptionaland extremely unusual hardship to the applicants immediate
(45:22):
family member who is a US citizenor lawful permanent resident. The INNA also
specifies that federal courts can review questionsof law that arise in removal proceedings,
but otherwise strips federal courts of jurisdictionto review decisions about whether to cancel deportation.
(45:43):
In twenty twenty, the Supreme Courtheld that the term questions of law
includes mixed questions of law in fact, such as the applicant application of a
legal standard to undisputed effects. Sohere in Wilkinson, the Justices will weigh
in on the between these two provisionsand decide whether the agency's determination that a
(46:06):
given set of facts does not meetthat statutory standard of exceptional and extremely unusual
hardship is a mixed question of lawin fact that is reviewable in federal court,
so really a statutory interpretation question abouthow the I in a provisions interact
with one another. And then nextweek on December sixth, the Court will
(46:28):
hear argument in muldro versus City ofSaint Louis, which asks whether Title seven
of the Civil Rights Act, whichprohibits employment discrimination, whether Title seven bars
discrimination in decisions about transfers without aseparate determination by a court that the transfer
(46:49):
decision caused a significant disadvantage to theemployee. So this case involved Saint Louis
police sergeant's claim that her involuntary transferout of the police intelligence unit was the
result of gender discrimination, and theEighth Circuit held that the transfer alone did
not constitute an adverse employment action andthat Muldreow then had no actionable claim because
(47:15):
she offered no proof of harm.So for example, her rank or pay,
her responsibilities had effectively remained the same. So now the court will consider
and clarify the types of employer decisionsthat constitute adverse employment actions for purposes of
Title seven claims. So those arethe cases for the upcoming sitting the next
(47:38):
two weeks and I think we havesome questions for our panelists, but before
I get to those, I wantedto invite the panelists to respond to each
other if they have any thoughts orcomments on the cases that we've covered and
(47:58):
what each of them has said.So invite folks to come off mute and
jump in if they'd like to commentor provide a question on what the panelists
have have covered. Justin do youwant to say anything about the jercracy brief
that you handled for the Chamber?Sure? So we at Decker we wrote
(48:22):
an amicus brief on behalf of theChamber of Commerce in the Turkeysy matter.
And you know, I think Ithink it's going to be interesting to see
how the court goes about resolving thecase, because you know, as mentioned,
there's three big issues in the matter, and if I had my brothers,
I would guess that they're going toprobably resolve it on the Seventh Amendment
(48:44):
grounds and then avoid, you know, upsetting the entire administrative state, especially
with regards to the sec A LJS. But with that said, then that
begs the question is how do yougo about doing that? And what parameters
do you put on the Seventh Amendmentjury trial rights. You know, there's
(49:06):
also an interesting question about incorporation.The Seventh Amendment has never been incorporated,
so you could get these like weirdinstances where you have you know, state
administrative tribunals going after people for verysimilar things that the federal government's going after
people, but one of them requiresa jury trial and the other doesn't.
(49:29):
So I just think the ramifications ofhow the Seventh Amendment holding effects, you
know, the law at large willbe will be really interesting. And just
the the case law at the Courton the Seventh Amendment is there's a dearth
of it. There's not a lotout there. There hasn't been a ton
(49:52):
of originalist work on the question.So I look forward to seeing what the
Quarter at least a couple of thejustices do on the jury trial right question.
And I think we have been seeingthe removal issues bubble up in other
contexts. So Audie, there's athere's a question in the chat about the
(50:13):
implications of an adverse decision to theSEC and Jerksy and its impact on for
example, a l j is forthe NRB. I think, you know,
there's been these removal questions in thecontext of other agencies too. So
what's your take on you know,the Court decides to reach the removal protections
issue of its implications beyond the secYes, definitely, I think that's an
(50:38):
important question, and I'll give atypical lawyer answer. It depends on how
the Court writes the jocracy decision,because you know, if the Court is
going to decide the decide the caseon the Seventh Amendment jury trial grounds,
then the I mean essentially, thequestion there is, you know, suits
are common love for the valuing controversymore than twenty dollars. So in Jarkas's
(51:01):
case, there's a quarter million civilpenalties, and from previous Supreme Court cases
we have heard, we know thatthe Supreme Court sees civil penalties or fraud
type cases as common law cases.And then you know the twenty dollars is
the easy, easy bar to crosswith the National Labor Relations Board. I
(51:23):
mean, most of the remedies Iwould imagine are more along the lines of
equitable remedies, right, I mean, it's a seasonsist. It's say I'm
sorry to the employees hold a unionelection a certain way. So it would
be interesting how the court draws theline on the jury trial question, if
(51:44):
it reaches that question, and howthat affects these adjudications happening in other agencies
like the National Labor Relations Board.On the removal question, if the Court
decides that the MSPB protection is ameaning full layer that is protecting the aljs
at the SEC, then I thinkthe Court will have to decide that there's
(52:08):
too many layers of protection removal protection, and the question can get complicated very
quickly, I think on the removalquestion, because remember Chief Justice Roberts wrote
the United States Versus Arthrex majority opinion. It was a precarious majority because I
mean so essentially in Arthrex, theSupreme Court said that aljs are executive officers
(52:36):
in the executive branch. So thenthe question becomes, you know who has
supervisory authority and who controls sort ofthe day to day functions of these administrative
law judges. Now, the answer, according to Arthrex is they are within
the executive branches chain of command.But in the Jacrazy case, the Commission
has considered that the alj's only everperform or judicial like functions. So again
(53:04):
Chief Justice Roberts would would probably wantto go back to his dissent in the
City of Arlington versus Federal Communications Commissionwhere he descended and three members of the
Court joined him. So four membersof the Court were sort of, you
know, grappling with this idea ofhow how can we have the executive branch
and officers within that executive branch beingexecutive branch officers and what happens when they
(53:31):
are not performing executive functions they're performingjudicial like functions. So so it would
be it would be it would Ithink come come down to whether Chief Justice
Roberts is able to uh uh,to bring a majority with him on his
views from City of Arlington, orwill a majority of the Court go with
(53:52):
sort of an Arthrix type analysis wherethe function that the officer performs doesn't really
matter for the removal analysis. Soagain, answer to that would would answer
this question of what happens with nLARB administrative logics. I mean, because
(54:14):
LARB, if anything, hardly everdoes any rulemaking. It only ever judicates
cases. So it will be interestingto see the outcome in nl RB cases
depending on that. Adia. I'mgoing to stick with you because we have
another question for you on the distinctionbetween private rights and public rights and why
fraud cases are one or the other. So can you just speak to that
(54:37):
a little bit more kind of youknow, review that that distinction and that
issue. Sure, So I thinkthe court, the Supreme Court has grappled
with the private rights versus public rightsdistinction in many cases. One of the
one of the most sort of earliestpronouncements on this point essentially drew a distinction
(55:02):
between what we view as as sortof like rights private rights, meaning you
know, the due process class,for example, protects the right to life,
liberty, and property. So ifthe government is trying to deprive somebody
of life, liberty, or property, then they have to do so by
following the due process of law.So if that's the way that the Supreme
(55:25):
Court views private rights, then theSupreme Court will have to, you know,
look at the remedies that the secessentially awarded itself through its in house
tribe unils, money, quarter amillion dollars in civil penalties, money,
bank accounts, quintessential property. Soif you're depriving jocacy of property, you
(55:47):
know, that's that's that's your answerthat it's a private right with that conception,
But the Supreme Court has also sortof complicated the issue for itself because
in the pe TAB cases, forexample, the patent trial and a peace
board cases, I believe Justice Thomasfor the majority or carried the majority of
(56:07):
the court is saying that, well, you know, patent rights are kind
of special property right, so theyaren't sort of like just you know,
government coming and depriving somebody of aprivate property. It's it's a private versus
private dispute that go you know,the patent cancelation disputes that go to pe
TAB. So that there may bethere may be ways for the court to
(56:30):
draw the or clarify the distinction betweenpublic and private rights. And you know,
this is the case where they havethat opportunity. The other wrinkle there
is, you know, what weconsider sort of public rights cases. Can
I mean one conception is sort ofthe entitlement cases, so that these aren't
technically rights. These are things likesocial security benefits where somebody is asking the
(56:54):
government for funds, veterans benefits.Same thing immigration saying I saying an applicant
is asking for an immigration status forexample, So that there might be ways
to draw a line or clarify thepublic versus private rights distinction. But I
think I think the narrowest holding therethey look fraud your The government is asking
(57:20):
for money quarter million dollars in civilpenalties plus seven hundred thousand dollars in disgoragement.
So it rings true that it's aprivate right without actually clarifying what the
line drawing what the line between privateand public rights is. So again we'll
see and that that would answer someof the questions as to the continued validity
(57:43):
of agency remedies through agency admunication inthe future. Great Professor Simon, you
you've gotten attendees very interested in bankruptcyto so a couple a couple of questions
for you. The first is onhow a non Article three court can affect
the rights of non at our thirdparties without jurisdiction over person, jurisdiction over
(58:08):
the party is or subject matter jurisdictionover the cause of action. So can
you speak to that question absolutely.So this I alluded to broader discussions about
bankruptcy court power. I think thisis really focusing on the details of that
the Supreme Court at various points isappined on the authority constitutional authority given to
(58:30):
bankruptcy courts. So for those ofyou that aren't familiar bankruptcy courts are not
Article three courts. There artical longcourts. However, every case they hear
they hear by reference from a districtcourt. So yes, there are in
you know, through cases like SternNew Marshall, we know that there's a
divide in what's sort of the coreof bankruptcy claims which they can finally decide
(58:52):
in non core, which they cannot. It's an oversimplification, but happy to
discuss more if there were more time. In short, there is this open
question, and again at various pointsthe opinions touched on this idea that will
wait a minute. If we're havingall this discussion about what's in the bankruptcy
Code, boy, shouldn't we belooking at the bigger question of whether the
constitution even permits this court to decidethis. The Second Circuit resolved this pretty
(59:15):
sweepingly by saying, look, thisis the sort of issue that has to
be resolved. The bankruptcy Court canissue findings a fact in conclusions of law,
you know, confirming a bankruptcy plan, but ultimately the district court has
to be the one to finally decideit. And that was the basis of
their ruling and again, so muchof the jurisdictional stuff is really fascinating but
(59:37):
can be resolved relatively swiftly by sayingyes. But whatever, the bankruptcy Court
did treat it as findings a factin conclusions of law that the district Court
has to review, so that Articlethree review would still be there. I
want to point out that the justices, and again someone told me this,
so don't quote me as being anexpert on it, but someone told me
that this is a very rare instancewhere the justices actually drafted the question presented.
(59:59):
Here. You see, in thiscase the parties actually requested to stay.
They didn't really seek certain it wasin the alternative sort, but ultimately,
when the Justice has decided to grantcertain response to granting that motion,
they drafted the question presented and theywere very careful. I don't think they
do anything without care. To onlyaddress the authority issue under the Bankruptcy Code,
(01:00:19):
not the constitutional issue. Now,some of the parties briefing kind of
touches into it, but it's reallyfocused on the statute and what the statute
allows. So I would be surprisedif the Justice is weighed into that area,
in part because there's been a loton it, and in part because
what the code says is quite enoughfor one case. But those are just
my instincts. The last part aboutwhat they will say, and then just
(01:00:39):
a clarification question on the sactlerk personalliability. So why weren't the saclerks shielded
from personal liability by the corporate structurehere? Oh so, first of all,
I will say I'm not an expertin state various laws about consumer protection
(01:00:59):
and front and all of that,But in short, a number of the
claims are direct claims by the statesand individuals against the sacklers for their individual
efforts in taking money, in misappropriation, consumer practices, defraud or fraud,
excuse me, defrauding consumers. Soall of those I believe are not only
(01:01:20):
they're not just derivative of claims againstthe estate. Those are direct claims.
So those causes of action have individualcauses of action that they could face exposure
for. I don't think they exclusivelyrely on, you know, for instance,
veil piercing theories. I think,really it does have separate causes of
action as to the individuals. Butthen I think the question, I think
to the question, I think itsaid well, are they just paying all
(01:01:40):
this money for the PR rehabilitation?And I would say I don't think so.
I think that even if ultimately theycould win, on the fact that
some of these claims are strictly forthe corporation and they're shielded by their role
in the corporation, they're facing iton a lot of litigation around the country.
So even if they ultimately prevail,settlement provides them peace in a way
(01:02:05):
that they might not ever get ifthey continue to litigate these one by one.
So I'm not sure they're winning thePR war anyway, but at least
this way they can stop the litigationcost and deal more with whatever else is
next. It's a lot of moneyfor a PR strategy, so I tend
to agree with you on that.I've stopped depining on what a lot of
money is to a lot of people. So it seems like this may not
(01:02:29):
be enough if you talk to lotsof people about this case. So then,
speaking of not wanting to quote you, I'm going to ask you the
question that no one likes to beasked, But do you have a prediction
in terms of what the court isgoing to do here? So, based
on just the facts of the underlyingcase and really this idea of reigning an
authority kind of a theme of overstepby various judicatory bodies. My gut would
(01:02:53):
be that they would overturn it andwould say that they're not permitted. However,
reading the briefing, I'll say thatI find the debtors brief very persuasive
and how they framed the argument,the history behind it, the legal argument
of where this source and authority comesfrom, and how bankruptcy was for so
long. So I think a oralargument will tell us a lot. I
(01:03:15):
would make my bet much more firmat that time. Okay, we'll follow
up with you on that. Onequestion for Professor Jenkins, So you mentioned
the sort of frequent appearance of thearm Career Criminal Act at the Supreme Court.
Is this the case that's going tosolve that litigation forever or are we
(01:03:36):
going to sort of continue to seeissues issues bubble up. Oh No,
I don't think that it's possible thatthis case, or really any one case,
could resolve all of the issues withthe on care Criminal Act because there
are so many. Actually, Ithink the problem and as a lot of
other scholars have commented, as well, I believe that the problem is with
(01:04:00):
the Act itself, and it's verydifficult to interpret and it and in practice
it seemed to not fulfill and achievethe goals that Congress had in mind,
and goals of uniformity. But wesee in this case, in this case,
how the time when the person commitsthe prior offenses. Based on the
(01:04:24):
time in which the person commits toprior offenses could change whether the person is
subject to the fifteen year mandatory minimumor not. You know, a difference
of just a day or two adrug being taken off the schedule or not,
or added to the schedule, andat what time period do we look
at the schedule And so people whohave committed the same offenses, one might
be subject to the Arm Career CriminalAct and another not. So I think
(01:04:48):
that really the way to resolve theseissues is to make a modification of the
Act itself, and in particular inthis case dealing with the drug offenses.
It's my personal view that drug offensesshould be eliminated from the Arm Career Criminal
Act. And that's based on astudy that I did with the Sentencing Commission
(01:05:09):
comparing recidivism rates of people who werehad committed drug offenses who were sentenced under
the ACA compared to the recidivism ratesfor federal offenders as a whole, and
the drug offenders actually had recidivism ratesthat were less than federal offenders as a
(01:05:29):
whole. So it doesn't seem tome to make sense to punish these people
more severely with a harsh military minimumwhen they re offend less than federal offenders
in general. And that's even consideringthat these drug offenders were generally their average
age was lower than federal offenders asa whole, and in general, recidivism
(01:05:54):
is greater for younger offenders, soit even went against that trend. And
so that's why I think the answersmodifying the AKKA and that these these concerns
you're particularly dealing with the categorical approachand all these different aspects and wording of
ACCA are probably never going to goaway unless Congress chooses to amend amend the
(01:06:15):
AKA. Thank you. Well,if it's a legislative solution that's going to
fix the problem, I think we'llprobably see the court continue to have these
these issues bubble up. So Ithink those are the questions that we have
from attendees, and thank you somuch to our to our panelists, and
to everyone who's joined us this afternoon. It's been a great conversation and I've
(01:06:36):
enjoyed participating. I'll turn it backto Nate. Was that a last minute
to get the legislature? Very good? Our thanks to UH, Stephanie,
Jennifer, Aunie, Lindsay and Justinfor dissing ice preview. Very well done.
We look forward to UH these casesand to having you all join us
(01:07:00):
again soon. We welcome audience feedbackby email at info at fedsoc dot org.
Have a great day. We area journey. Thank you for listening
to this episode of Teleforums, apodcast of the Federal Societies Practice Groups.
For more information about the Federal Society, the Practice Groups, and to become
a Federal Society member, please visitour website at FEDSOC dot org.