This is Bloomberg Law with June Grosso from Bloomberg Radio.
During the Supreme Court arguments over whether former President Donald Trump is immune from criminal charges for illegally trying to overturn the results of the twenty twenty election, Justice Samuel Alito stood out from the other justices with his repeated concerns about opening presidents up to criminal prosecution.
Today, I understand you to say, well, you know, if he makes a mistake, he makes a mistake, he subject to the criminal laws just like anybody else. You don't think he's in a special, a peculiarly precarious.
Position, but that the president may be criminally prosecuted by a bitter political opponent. Will that not lead us into a cycle that destabilizes the functioning of our country as.
A Democracytional Democrats have asked Aledo to recuse himself from that case and another case that could have implications for the Trump prosecution, not because of the questioning, but because flags flown outside Aledo's homes are associated with the pro Trump mob that attacked the capital on January sixth, creating
an appearance of impropriety for the conservative justice. An upside down American flag associated with the Stop the Steel Movement was flown outside Aledo's Virginia home, and an Appeal to Heaven flag, a symbol of Christian nationalism, was flown outside Aledo's beach residence in New Jersey. Similar flags were carried by the January sixth rioters, but Alito has flatly refused to recuse himself from the cases, blaming his wife for the flag flying. What's more, the Chief Justice has said
he's not getting involved. It's a pattern we've seen before with Aledo, who has a history of stirring up political contra. Joining me is an expert in constitutional law, David Super, a professor at Georgetown Law. Justice Alito says there was an upside down flag flying at his house for days, and he was not aware of it until it was called his attention, and then he tried to get his wife to take it down, but she refused for days. Does that pass the Laft test?
Not for me, I don't think for most people. It's his house. We are responsible for what's on display in our houses, and if it is his house, as co owner with her, he has every right to take it down. She probably then would have a right to put it back up, but he doesn't need her approval to take it down as a co owner of the house.
What was really odd was he went into detail about the ownership of the two houses. I just thought that that was unnecessary and odd.
It is he protests a way too much. Which he is a co owner of the house under whatever ownership arrangement there is, he has the ability to change the house and what is displayed on it. And if he couldn't, he surely must recognize that reasonable people would feel that that casts a question on his impartiality. Most people don't understand the intricacies of property ownership. It would assume quite reasonably that a flag displayed in front of his house tells us what he thinks.
Initially, he denied the flag was hung upside down as a political protest. He said it was flown by his wife in response to a neighbour's yard signs that were critical of Trump, saying Trump is a fascist, etc. So there was a political reason, then tied to the former president who was accused of taking part in a coup attempt, you know, days earlier to the flying of the flag.
Yes, that's obviously political. What you or I think about the president United States or a former president is inevitably political, and it's political relating to cases that he was deciding.
As far as the Appeal to Heaven flag flown outside his beach residence in New Jersey, he said he wasn't familiar with the flag's meaning. I was not aware of any connection between the historic flag and the Stop the Steel movement, and neither was my wife. So he's just feigning ignorance.
This is a very smart justice, a very learned justice, a very well read justice, and a justice who, in his opinions, in his interventions in oral argument, shows a great deal of knowledge about a great many things. I don't know what he does or does not know, but I know a reasonable person would assume that he knows what that means, and would assume that that indicates a pre commitment. In cases involving January sixth, he cited.
The recently adopted Code of conduct by this Court. A justice should disqualify himself for herself in a proceeding in which the justice's impartiality might reasonably be questioned. That is, we're an unbiased and reasonable person who's aware of all relevant circumstances would doubt that the Justice could fairly discharge his or her duties, and he said that these two incidents of flag flying don't meet the conditions for recusal. But we have people, lawmakers and others saying that this
puts his impartiality in question. So it seems like it does satisfy it.
Oh, it certainly satisfies it. This is something that, if the shoes were on the other foot, would be subject to enormous outrage. Much more tangential indications of commitment have been cited by former President Trump and many others as signs of bias, And indeed, a liberal Supreme Court Justice A. Ford Us was put off the court in significant part because of perceptions of bias in favor of the Johnson administration that were much weaker than this.
What does it say about that ethics code that the Justice is adopted last year, which they get to enforce themselves. I mean, is it worth the paper it was printed on?
No, it's completely worthless. The lack of independent and forcibility or even independent fact finding makes it worthless right there. But then when you look deeper, the substance of it is completely flimsy. It is for the sake of quieting public outrage, not for actually improving the ethical standards of the court.
Is it rare for justices to get into this back and forth with lawmakers, you know, writing letters responding to them. I mean, does it show that Alito might be concerned about public reaction for once to.
Some extent, yes, Justice Alito has been more willing to engage in the popular media than most Supreme Court justices of the modern era have been. And this it's consistent with those tendencies.
So Senator Dick Durbin, the chair of the Judiciary Committee, and Senator Sheldon Whitehouse wrote a letter to the Chief Justice Roberts asking him to make certain that Alito recuses himself in any case is related to the twenty twenty presidential election in the January sixth attack on the Capitol, and they also requested a meeting with Roberts as soon
as possible, and Roberts refused on both counts. He refused to meet with the senators, saying, apart from ceremonial events, only on rare occasions in our nation's history has a sitting chief justice met with legislators, and he refused to get involved in the request for Alito to recuse it all, saying members of the Supreme Court recently reaffirmed the practice we have followed for two hundred and thirty five years
pursue into which individual justices decide recusal issue chose. This is the second time in less than a year that there have been ethical controversies surrounding Justice Alito. Isn't it time for Roberts to get involved?
He certainly could step in. The Other justices on occasions in the past, have chosen to prevent justices who they thought were impaired from participating in decisions. There are seven justices that do not have these questions about them, and they could simply decide that they will not hand down any decisions in which Justice Alito's vote is decisive, or if they are similarly concerned with the ethical questions about Justice Thomas in which either of their votes are decided.
If they do that, they still have a solid conservative majority, and the outcomes of cases might well not change, but the public confidence certainly would be much higher.
Democratic Senator Richard Blumenthal has also suggested that the Chief Chief Justice should just refuse to assign opinions to Alito and Thomas.
That's completely within the Chief justices authority, but I'm not sure what that accomplishes. Justices on the Supreme Court to exercise much of their power through their votes, and unless the individual justice refuses themselves or the other justices refuse to allow that justice's vote to be decisive, then the compromise justice will still be able to participate and still have great power.
Senator Durbin said he's not going to hold any hearings on this or do anything further. But unless Congress does something further, this is going to continue, isn't it? With justices not recusing themselves when it seems apparent they should. Another example is Justice Clarence Thomas taking part in January sixth case is when his wife had some involvement there.
I mean, there seems to be no way to force ethical obligations on these justices when they're deciding for themselves, and no one is overlooking that.
Well.
There are several people that could impose us f coal obligations on them, but none are willing. The Justice themselves could do so. There's ample precedent of not engaging in over political activity when you're sitting on the court and not taking valuable gifts from parties with interests in front of the court so that justice could do it themselves. The others have injustices could do it for them by refusing to allow those two to cast siding votes in
cases where they're compromised. Congress could do it by passing legislation. The Constitution says that the Supreme Court's jurisdiction is subject to any exceptions Congress wishes to make, and Congress could simply say that the Court has no jurisdiction in cases in which justices are compromised, and Congress could impeach and
remove one or more justices. The fact is that Congress isn't going to do that because the voters have not demanded that Congress do that and have not insisted that their representatives in Congress be willing to hold the Court to a higher standard.
Reading Alito's letter, it just seemed to me that he's just not self aware. He may be smart, he may be brilliant, even but he's not self aware. He writes this about his wife. She makes her own decisions, and I have always respected her right to do so, And it seems so ironic to me, considering his decision to take away every woman's right to choose to decide what to do with her own body.
Well, it is, and the notion of hiding behind one's wife to excuse one's conduct is one that unfortunately, men have used throughout the years, not to empower women, but to exploit them. And in that sense this fits with the pattern. It's also striking that he expresses such ambivalence about what these flags mean when quite recently he wrote a concurring opinion in a case about flying flags in Boston City Hall in which he said flags are very important.
And in this one he said, my wife likes flying flags.
I don't, which suggests that flags are not very important. So which is it?
Justice?
You want to have it both ways, I guess Congressman Jamie Raskin saying that you know, the Justice Department can do something if it wants to.
What is he referring to, Well, there is a statute part of the Judiciary Act that requires justices to recuse themselves if a reasonable person could regard them as being biased particular case, and that requires them to refuse themselves if they have or their spouses have certain kinds of connections with the parties or the interests or the outcome
in the case. This statute pretty clearly is implicated by Justice Alito's flag flying and by some of the valuable gifts that he and Justice Thomas have received by parties with interest in front of the court. This statute does not require anyone to file any emotions. Historically, as Justice Roberts says, individual judges and justices have taken upon themselves
to recuse themselves. But the Justice Department, as a party to these cases, is certainly able to file emotion for the refusal of these justices.
But unlikely too, because of the repercussions.
Very unlikely too. It would be refusal in just a few cases, and the Justice Department appears in front of the Court on dozens of cases every year and would not want to alienate two of the nine justices for all of those other cases by pressed seeing a recusal in this one. And in fact, the likelihood that either justice would recuse themselves when they've so far refused to do so is infinitesimal.
During the oral arguments on the presidential immunity case, some of Justice Alito's comments were supportive of presidential immunity. In first of all, they've delayed this so long and then decided to take it and then did it on the last day of the session, and now probably there won't be a decision until the end of June. I mean, how do you think the public will receive it if it's again a six to three vote down ideological lines.
Oh.
I think the public will be quite troubled because the Supreme Court has shown on numerous occasions its ability to move very very sat when important issues are at stake. They took cases involving the restrictions under the pandemic very quickly. They've engaged very quickly in challenges to things that President Trump did about immigration about Muslims. They can move fast
if they want to. Their choice to move slowly, and particularly if the final decision is one that requires a remand and lengthy proceedings below which everybody knows will then get further appealed. I think a great many voters will believe that the majority the Court is running out the clock for the President to allow him to avoid going to trial before the election.
Thanks so much, David Best. Professor David Super of Georgetown Law. In a unanimous decision, the Supreme Court cleared the way for an NRA lawsuit against a former New York state official, overclaimed she unconstitutionally pressured companies to blacklist the gun law be Following the deadly twenty eighteen school shooting in Parkland, Florida, Justice Sonya Sotomayor wrote that the critical takeaway is that the First Amendment prohibits government officials from wielding their power
selectively to punish or suppress speech. Joining me his First Amendment expert Eugene Volik, a professor at UCLA Law School. He was counsel of record to the NRA before the Supreme Court. Eugene, what many people may see as unusual here is that a lawyer for the ACLU argued the case for the NRA before the Supreme Court.
David Cole was a very experienced from court advocate. More importantly, I think what was really helpful is that there were the NRA and the ACLU before the Court together. I think that sends an important message about the significance of the case and about the breadth of the First Amendment issue.
Start by telling us, know what you think the significance of this case is.
So let's say the government falls up, some intermediary maybe calls up a bookstore or calls up a billboard owner or calls up an insurance company and says, you know, we think that the advocacy groups you're dealing with, or the books that you're distributing, or the group that is buying space on your billboard, we think that its messages are bad messages. We think they're bad for society in various ways, and we'd like you to stop doing that.
And what's more, we have power over you. We could be the police department, or the Justice Department, or financial regulatory thought that could have a profoundly coercive effect on these intermediaries that even without actual prosecution or a civil case against the actual speaker, these kinds of threats to intermediaries can do a lot to make it harder for the speakers to speak because they won't be able to distribute their books through certain bookstores, or they won't have
financial services that they need in order to So the NRA alleged that that's what the New York Department of Financial Services did, that it pressured various financial companies insurance companies, banks, and the like to stop doing business with the NRA and thus make it farther for the NRA to engage in its advocacy. But of course this isn't a second amendent case. It's a first Amendment case. It applies to everybody.
It could equally be some other state try to do the same to plant Parenthoot, or some state trying to do the same to a Propoalestinian organization or a pro Israeli organization. So this is a broad first Amendment question that the courts dealt with and unanimously resolved in favor of the speakers and said, look, if it can be shown that the government was engaging in such coersion. At this point, it's just alleged. This is just an emotion
to dismiss. So nothing has improved yet. But if it could be shown in court that the government was pressuring intermediaries to stop doing business with organizations because of those organization speech, that would be potentially a first to women violation. That's an important holding. It reaffirms a principle that was first announced by the court more than sixty years ago. But it's an important principle that's worth reaffirming.
I think, so Eugene, was this case an easy one for the justices to decide.
Then well, they were unanimous. There were concurrences from Justice Gorsic and from Justice Jackson, but both of them joined all the other justices, So I think at that level it probably seemed pretty straightforward for the court. This having been said, you know, the Second Circuit ruled the other way, ruled against the NRA in this case and said, on these facts, there's not enough allegation of coercion. So you know, I like to think, I mean, I'm representing the NRA here,
I'm obviously not an impartial party here. I like to think we have a very strong case, and the US Supreme Court agreed with us. But at the same time, this was something that lower courts, you know, had struggled with in various kinds of cases, and I think this is something that the Supreme Courts unanimous decision here is going to provide more.
Guidance for lower What was the argument at the Supreme Court of Maria Vulo, the New York state official who was the former superintendent of the Department of Financial Services.
First of all, there were, as usual in these kinds of cases, there is or usual various procedural arguments. The lawyer's cruse superpower is that we can turn any question into a question about procedures. The Supreme Court was not impressed by their procedural arguments for various reasons. I won't detain you further with them. I don't think your listeners are going to be terribly interested. But a lot of
the argument was about this procedural bush substantively. One of the things that New York said is, look, we're entitled to speak out. We as the government, We're entitled to say, oh, the NRA is bad, gun control is good. And the Supreme Court agreed, and we agreed. Of course, the government is entitled to express its views. But the Court said, what was going on here, at least as alleged by
the NRA, was not just the government's self expression. It was rather the government saying things in a way that might be seen as coercive to a reasonable financial intermediate. And once the government stops just trying to persuade and begins kind of pressure that could be coercive, well that's where the government's right to speak stops, and the NRAs and other such groups for First Amendment right to start.
Another thing that the New York argued is that the NRA had participated in various insurance transactions that were illegal under New York insurance law, and for the purposes of this case, the Supreme Courts was willing to assume that this was so. But the Court said it doesn't matter. Obviously, if the NRA had violated some rules, then those rules could be enforced against the NRA and could be punished
in various ways, could find and such. But what the New York government was trying to do is not just imposifying on the NRA for past contact, but was trying to pressure, at least as alleged to pressure financial intermediaries to stop doing business with the enteray in the future as well, including for perfectly legal transactions. So the Court acknowledged, of course, the government has the power to speak. Of course, the government has the power to enforce neutral conduct restrictions,
such as restrictions on certain kinds of insurance practices. What the government can't do is try to use those powers as a means of trying to punish or deter or otherwise interfere with constitutionally protected speech.
Did you and the ACLU take this case in order to support the broad principle of free speech for all organizations, no matter what they represent this is going back to the lower courts. But there's a qualified immunity argument that the Supreme Court didn't discuss. Could that actually stop the case from going forward?
Well, so there's a qualified immunity argument here which says that in any case, Ania shouldn't be able to get damages because the law wasn't clearly settled. The Supreme Court didn't reach that. It said, look, we've resolved the substance of First Amendment argument. We're going to leave it to lower courts deal further with any qualified immunity claims. They're also injunctive claims that in this case that wouldn't be subject to qualified immunity in any event.
Of the like the Court is considering similar issues in a fight over the Biden administration's communications with social media companies. Does this decision at all indicate how that case might be decided.
It does not speak to that case. This is the mercy the Missouri case, and I think the Court bard deliberately didn't dip its hand. It tries not to disclose upfront what it's going to be deciding, even in a couple of weeks. This case involved a pretty straightforward application. This principle set forth over sixty years ago. In this case called Bantam Books be solid. It involved a claim that the government was coercing inter dearies to stop doing
business with speakers. And the real question was was there enough alleged to find that kind of courson in mercy? The facts are very different, So there's a separate question there was enough alleged there to show that there was coersion by the government of social media platforms, And the court may very well say in that case, yes there was or there wasn't. But the decision in this case
likely wouldn't affect much but what it decided there. Likewise, in the Mirthy case, there's also a separate question, which is, even if there's no coercion, was there enough entanglement between the government and the social media platforms that even kind of non coercive requests were on constitution non coursive request that platforms removed certain material that was not an issue that was pressing.
I mean, the Roberts Court has been, would you say, very receptive to First Amendment claims.
Well, so there are different kinds of First and claims, and even if we focus just on free speech claims, there different kinds of free speech claims. There are different legal theories involved in them, some of them involved, for example, claims there was a case last year having to do
with alleged solicitation of criminal conduct. Well, no, Robert score isn't very friendly to claims that someone has a First Amendment right to urge people to commit certain kinds of very specific crime, whereas here it's a very different kind of first amenation. Likewise, a lot turns on the facts. I think that the facts in this case, again as alleged by the plaintiffs, were really quite strong under existing well settled precedent president going back of course to the
Warren Court right nineteen sixty three. So I don't think this has to do much with whether the Robert scord is particularly free speech friendly or not. And again you see here both the liberals on the Court and the conservatives of the Court reaching the same view. I think, just on the well settled legal doctrine in this case, without any real need to dive further elaborated further, I think the NA has a very strong claim and that's what Supreme Court concludes.
So he's a pleasure to have you on Eugene and congratulations on the Supreme Court win. That's Professor Eugene Vollik of UCLA Law School coming up next on the Bloomberg Lawn Show. In another unanimous decision, the Court gave homeowners another chance in an ESCRO dispute with the Bank of America.
I'm June Grosso and you're listening to Bloomberg. In a unanimous decision on Thursday, the Supreme Court basically punted on the question of whether the Bank of America must pay interest on New York mortgage borrowers' ESCRO accounts, which state law requires, but the Court did give homeowners another chance to force that bank and other large banks to pay
that interest. The Court threw out the Second Circuits ruling in favor of the bank, which has refused to pay interest on the money it collects to pay borrowers, insuranceants, and property tax bills. Bank of America and the Office of the Controller of the Currency, the federal regulator overseeing national banks, had argued that national banks are exempt from state consumer protection laws under the National Bank Act, but the Justice Department was on the opposite side of the argument,
supporting the homeowner's position. Something Justice is Neil Gorsich and Brett Kavanaugh pointed to when questioning Deputy Solicitor General Malcolm Stewart.
In fact, we have exactly the regulation you say, if they did this, they did it.
They said there are no.
ESCRO regulations, they're permissible, understated, they're all preempted.
But you're not defending that regulation.
You're disavowing it.
You flipped flopped positions on it.
And I'm asking, is the OCC ever going to get around to doing that which God Frank directs it to do? Well, I think I would say God Frank authorizes, but doesn't
direct it to do this. Now, if the petitioner's position in this case veils, and if the court holds that some inquiry into practical impacts is necessary with respect to the individual state law, then it's very possible that the OCC will start making these case by case determinations, because, independent of legal expertise, the OCC has expertise in the way that national banks operate and can bring that expertise to bear in determining. If it has expertise, why are.
You disagreeing with its long standing position?
I think the two or three reasons.
In the majority opinion, Justice Kavanaugh wrote that the Appeals Court did not perform the kind of nuanced analysis required by federal law and prior Supreme Court decisions to determine if a state law must give way to a federal statute, and the court sent the case back to the Second Circuit for that analysis. Joining me is Aaron Bryan. She's co chair of the Consumer Financial Services Group at Dorsey and Whitney. Tell us about the case, Karn, what.
This case was about at a factual level, with state interest on escro laws. What those are are state laws that require banks to pay a certain percentage of interest on escro accounts that they're maintaining for mortgage borrowers. Those vary by state. Not every state has those requirements. The specific interest rates can vary, and so that becomes a compliance burden for banks to manage the different requirements in
all of these different states. So, in this particular case, a borrower challenged Bank of America's practices on this instead, Bank of America needed to follow the state law in New York that required the payment of interest on escrow. Bank of America's position was, we are a national bank.
This is preempted under the National Bank Act. We can't be expected to comply with us in every state, and so this ended up being litigated, went up to the Second Circuit, and eventually it went up to the Supreme Court. And the legal issue here was whether these state laws, which can very considerably state to state, are pre empted by Section ten forty four of the Dodd Frank Act, which was enacted in twenty ten. This followed the financial crisis.
And what that section does is it codifies an earlier Supreme Court case called Barnet Bank. And Barnet Bank was a preemption case that basically required that courts look at the specific facts to determine whether a state law is
interfering with a national banking power. So, in other words, if the bank is permitted to do something under its national bank charter, but maybe operating in different states, the courts look at whether the particular state requirements that the state is asking the national banks to comply with are going to be preempted or not. And so that's what that case was. It got codified as part of DoD Frank.
The OCC which is the primary prudential regulator for national banks, also issued regulations under that but this was the first time that the Supreme Court had a chance to take a look at this. They've had other opportunities, they've declined sart. This was the first time we got to hear what the Court thinks about whether that standard articulated and DoD Frank changed the previous standard, narrated, expanded it, or kept things exactly the same.
So it was a unanimous decision written by Justice Brett Cavin. Also, what did he say? What did the court actually find?
So the Court was resolving a circuit split with this case. We had an older case Lousmac versus Bank of America that dates back to twenty eighteen. In twenty nineteen, the Supreme Court had denied start on that, and these two cases basically articulated different preemption standards and so and in this case is the Supreme Court gave us a little bit of what the industry was looking for, but not
all of it. The Court came to this and said, we're looking at the National Bank Act, which codified Barnet Bank in order to apply that, We're going to actually look at Barnet Bank and look at the reasoning that the Court had reached in the Barnet Bank decision. And what they said was there's no bright line test here. This is always going to be a fact specific inquiry, both for the banks and for the courts that are
applying this. They will have to actually look at whether there is significant interference with the national banks banking powers caused by the state law at issue. And so the court is not going to say something like they've done an immigration law where they say any state law, almost any state law touching immigration is preempted by federal law. They did not go that direction. They said, this is narrow,
this is fact specific. You were going to have to look under our previous precedents, even before Barnett Bank and analyze whether a state law significantly interferes with the bank's powers.
So basically they're sending it back to the Second Circuit for redo and saying, redo this. We didn't like the way you analyzed this, or you didn't analyze this well enough.
Yes, that's exactly what they did. They said, you applied the wrong standard, so we want you to go back and apply the right standard. What the Second Circuit had done was close to a field preemption standard, where they said, if there's any interference with the national banks powers, we're going to treat that as significant interference, and so essentially the Supreme Court said that is taking things a little bit too far. We need to return to this fact
specific inquiry. But they did not reach the ultimate issue of whether the specific interest on escro law was preempted. Instead, they said, okay, Second Circuit, here is the correct formulation of this test. We want you to go back and look at this again under that standard.
Did the Court give in Justice Kavanaugh's opinion, did they give enough guidance to the Second Circuit?
I think so. You know, time will tell. It's hard to say whether we're going to see more litigation on these issues going forward. What the Court has done is said, our prior precedents on this are still good law, and so these are older cases. But there are cases that are well known in the banking industry. And so I do think that there's enough there, and there's enough specificity in the opinion about what significant interference means that the
Second Circuit should be well positioned to do the analysis. Now, it is probably likely that we're going to continue to see disputes over the application of that test because it is fact specific, and so you know, two people can look at the same set of facts through a different lens and sometimes reach different conclusions. But ultimately they have told the Second Circuit exactly how they want them to look at these issues, without directing what the outcome should be on this particular law.
In this case, so Bank of America and the OCC were on one side, and the Solicitor General and the Justice Department were on the other, which is unusual. Why were they not in tune.
It's a great question. They were not in tune because the Solicitor General and the Justice Department were looking at this lightly differently. So the OCC, as I had mentioned earlier, they are the primary prudential regulator for national banks, and the OCC has its own regulations. They have their own position on these things. Their position is a little bit more to the middle of both what the Court and the Second Circuit in Canta did and what the Court
and LUSNAC did. I think they felt that this was just not the right case for this to come up, that there wasn't a need to revisit this.
Consumer advocates were they hoping that the Supreme Court would set some kind of a bright line rule that state consumer protection laws can apply to national banks.
Yes, let me say no, one was completely happy with this decision.
Maybe that means it's a good decision.
I don't know, it might yeah, So a lot of consumer advocates were really hoping that the Supreme Court would would come out and really narrow preemption. If the Court had taken a position that says, there are very narrow circumstances where we're going to find a federal preemption of state consumer laws. That would be good for consumer advocates because it gives them more of an ability to challenge bank's abilities to shield themselves from some of these state laws.
So some consumer advocates were certainly hoping for that outcome. Consumer advocates have been happy with this decision because, at the very least, it didn't expand preemption, which would have made it more difficult for them to force banks to comply with state laws. But it also didn't give them everything they wanted because the Court did not reach the ultimate issue on this particular case. It didn't expand the
doctrine at all. So while there's some celebration, I don't think that consumer advocates are one hundred percent thrilled with us either.
So, I mean, does this mean more litigation in the future for national banks.
I expect this to be about the same amount of litigation, because what this is doing is really saying the law that you all thought applied does apply. Luznak and Cantaro confused things a little bit, so there had been an understanding that the Barnet Bank standard would apply, and what that meant. With the circuit split, that became more complicated.
For the most part, national banks have continued to analyze these issues under the Barnett Bank standard, and so I don't think this is going to change much in terms of day to day practices, but you know, time will tell anytime you have a change to how consumer laws
are interpreted. There's certainly interest in bringing new challenges, bringing creative arguments that might cause the court to look at it from a slightly different perspective, But I personally am not thinking that this is going to have a huge effect on that.
Coming up next on the Bloomberg Law Show, I'll continue this conversation with Aaron Bryan of Dorsey and Whitney and we'll discuss the implications of this decision for the occ Also an update on the Hunter Biden criminal case, which began today. Remember you can always get the latest legal news by listening to our Bloomberg Lawn podcast. You can find them on Apple Podcasts, Spotify, and it www dot Bloomberg dot com, slash podcast, Slash Law. I'm June Grosso,
and you're listening to Bloomberg. I've been talking to Aaron Bryan, co chair of the Consumer Financial Services Group at Dorsey and Whitney. Erin Justice Gorsach had a lot of questions about the OCC. Will this decision have any implications for the OCC?
At this point, I don't see any major implications for the OCC. The message to them appears to be business as usual, although obviously they will be monitoring developments on this as it goes back to the Second Circuit, potentially if it comes back to the Supreme Court for a second time, or if other challenges work their way up
in different cases, they will be monitoring it. But I would not expect any major changes to the way that they regulate banks based on this decision because it is fairly consistent with their prior view and.
There was a circuit split between the Ninth Circuit and the Second Circuit. So is the Court saying that what the Ninth Circuit did was correct and the Second Circuit was wrong.
The court is saying that they both got it a little bit wrong. The Court is saying we have to look for significant interference and that that's going to be fact specific. So you can't just say if the law can theoretically be complied with by a bank in all fifty states, then it's not significant interference, which is more like what Lusnak said. At the same time, you can't say that if there's any interference, then it's significant, which
is more like what Cancerro said. They're really drawing a line down the middle and saying significant interference is going to depend on the facts. The court needs to look at what is the bank saying about, how this is significant interference? How does this fit with prior precedence? Is just an issue that the courts have looked at before. What is the law in all of those have to
be examined. So although in some ways they're using similar words to both the Second Circuit and the Ninth Circuit, they're telling both of them that they got it a little bit wrong and that ultimately this has to be a more effect specific inquiry.
And only about a dozen states have mortgagees grow account interest rules similar to new York's. I'm surprised. I thought it would be more.
Well, it may be more after this that's certainly getting a lot of attention, so that could be one possible change. You know, these are very small amounts though that we're talking about. The kind of interest on these accounts and the aggregate it can make a big difference. But you know, for the average consumer it may be a few dollars a year. It's not an incredibly large amount of money. That can make a big difference for some people's budgets, of course, but this isn't a way that the banks
tend to make a lot of money. I think from the bank's perspective, this is really more of a compliance issue, but it can be very challenge. Escrow honestly is one of the most challenging parts of mortgage servicing to begin with, and so the more variations you have on how you need to handle escrow accounts, the more complicated it becomes and the more likely errors are. So from the bank's perspective, you know, this is really about the challenges of complying
with very different laws and different jurisdictions. The preference, obviously would be to have one set of laws that applies everywhere. Now, one thing that Congress could do is to say we are going to specifically pass the law. You know that overrides us, but basically could codifies preemption specifically for interest on escrow. So it's probably not going to happen, but that would be one other way that this could be resolved.
The attorney for the homeowners call this a big win for American consumers. But is it a big win?
Well, it may be a win for a plaintiffs' attorneys. I don't see this as a big win for either consumers or banks. I think that from the bank's perspective, in a perfect world, or might have decided to expand preemption towards something more like field preemption, which we talked about earlier, and some in the banking industry had pushed for that. But I just don't think that was ever going to happen. The outcome we got was right down the middle. I don't think that it makes either side
really happy. I don't see this as a huge win for consumers. I also don't see it as a huge win for banks. I think ultimately this is a decision that reaffirms the status quo consumers are not going to get rich off of this. We're huge amounts of money that they'll be getting an interest on their escor accounts, even in those states. So I don't see this as a huge win for consumers. It's not necessarily bad news for them either, But this is really just down the middle.
Aaron, This may be a little in the weeds, but tell us about what you've called this provocative footnote.
The Court did have a really interesting footnote. So the Court common that on remand the Second Circuit could consider the significance if there is any of the OCC's preemption rules. So that's interesting because although it was discussed at one point earlier in the case, that was not an issue before the Supreme Court, So for them to specifically call that out in a footnote, all that says, we want
you to consider this right. And then the other thing that they noted was that the Second Circuit could also consider the potential relevance of a Dodd Frank Act provision that recognizes preemption of state consumer finance laws under other federal statutes. So again, this was something that came up earlier in the case was not litigated at this stage. But it is curious that the Court specifically highlighted this.
It's almost teasing that they would like the court to look at these issues, but they would like another chance to consider it. So hard to say what that means if the Court is leaning one direction or the other. But also interesting that they that they flagged that for the parties involved with us.
What's the big takeaway here for banks?
The takeaway here for banks they're going to have to continue to monitor this. In the short terms, they're going to have to continue to assume that there may not be preemption for some of these state laws that are not specifically called out in federal statutes. But we'll see
what the Second Circuit does with this. It may be that this interest on ESCO issue goes away now that there's agreement about how the test should be applied, but banks to continue to monitor this because we have not reached the ultimate issue yet and there is still potential for new direction on the topic.
Thursday was not a good day for the Second Circuit. It was reversed in two cases. Thanks so much, Aaron. That's Aaron Bryan, co chair of the Consumer Financial Services Group at Dorsey and Whitney. In other legal news today, a jury has been seated in the federal gun case against Hunter Biden, President Biden's son. The jury of six
men and six women will hear opening statements tomorrow. Hunter Biden has been charged in Delaware with three felonies stemming from a twenty eighteen firearms purchase when he was, according to his memoir, in the throes of crack addiction. He's been accused of lying to a federally licensed gun dealer, making a false claim on the application by saying he was not a drug user, and illegally having the gun for eleven days. The case has had a tortured history.
It's going to trial following the collapse of a plea deal that would have avoided the spectacle of a trial so close to the twenty twenty four election. Hunter Biden has pleaded not guilty and has argued he's being unfairly targeted by the Justice Department. The questions to the potential jurors tested their knowledge of the case, their thoughts about gun ownership, and whether they or anyone close to them
have struggled with substance abuse or addiction. Other questions focused on the role politics may have played in the charges. One potential durer who was sent home, said she didn't know whether she could be impartial because of the opinion she'd formed about Hunter Biden based on media reports quote It's not a good one. In a statement today, the President said he has boundless love for his son, confidence in him, and respect for his strength. And that's it
for this edition of the Bloomberg Law Podcast. Remember you can always get the latest legal news by subscribing and listening to the show on Apple Podcasts, Spotify, and at Bloomberg dot com, Slash podcast, Slash Law. I'm June Grosso and this is Bloomberg