Chief Justice Roberts Pledges to Reform Judiciary (Audio)

and on Bloomberg dot com Slash Podcasts. It's Chief Justice John roberts thirteen year end report on the state of Federal Judiciary, and it may be the report that gets more attention than any other because it raises issues that have been sweeping the country with the me too movement.

The report is largely devoted to the federal judiciary's response to this year's natural disasters, but the Chief also highlights the depth of the problem of sexual harassment in the workplace across the country, shinning a spotline on a special problem for the judiciary where law clerks work closely and in confidence with powerful judges Joining me as Deborah Cat's founding partner of Cats, Marshall and Banks, Deborah Roberts said events in past few weeks have made clear that the

judicial branch is not immune from the problem of sexual harassment. He didn't mentioned prominent Judge Alex Kazinski of the Ninth circuit by name, but he was undoubtedly referring to him.

Tell us what happened with Judge Kazinski, sure well. On December eight the Washington Post ran UH bombshell of a report reporting on the fact that a number of former clerks of Judge Kazinski had accused him of sexual misconduct and there was a range of behavior that was reported by these former judges that ran the gamut from subjecting them to inappropriate, bizarre, sexualized comments, to pornography UH and essentially creating an environment where they did not feel able

to complain because there was no mechanism to complain, but that they felt completely UH demeaned by the experience, and the judge responded in a way that was extremely dismissive and said, essentially, if this is the worst I've done

in thirty five years, I can live with that. That led to the Washington Post on December fifteenth reporting that nine more women had come forward and these women had also described bizarre, inappropriate comments, but also said that the judge had subjected at least four of them to touching or kissing, clear sexual harassment, and at that point, UH it was clear that a floodgate had been opened and

the judiciary had to respond. Ultimately, the judge was forced to submit his resignation before an investigation was undertaken, so he announced his retirement on December eighteenth. Let's discuss the complexity of the problem with law clerks because an appeals court judge will usually have four clerks and there is

a strict code of confidentiality they work under. There's also the fact that the judge is very influential in their future career as many times one are the special pressures and conflicts a clerk faces who is harassed, Well, you've you've named for a few Getting a federal judicial clerkship is a real plump for any uh person graduating from law school, and it is a significant stepping stone for

advancement in the legal profession. People are very reliant on judges to get recommendations to either advanced to higher level clerkships in Kazynski's case, to the U. S. Supreme Court, which is the very top of the profession, or two other positions at firms and elsewhere, um. And it really is the first significant lawyering lawyering job that someone has out of law school, so the clerk is completely reliant on the judge for connections and recommendations, and few people

want to burn that bridge. The other problem is that, as you've described, seederal judges have four clerks, and you are very isolated in the judges chambers. You don't discuss your work with other clerks or with other judges. UM. So there really isn't a mechanism to go tell your coworkers,

this is what's happening in my chambers. And what the clerks have done is they sent a letter that I think at this point has well over seven hundred signatures describing needed reforms within the court system to make clear that the UH condition of confidentiality does not apply to keeping judges UH. I'm sorry to keeping clerks muzzled when

they're being subjected to sexual harassment. So that was a very significant first step UH that the judiciary did, which is it amended the law Clerk Handbook to provide UH clarity that harassment is not one of those conditions that is to be kept confidential. Roberts said he's already asked the Director of the Administrative Office of US Courts to assemble a working group to consider whether changes are needed in the Judiciary's Code of Conduct, etcetera. Is that enough

is will that do it? Well? That's an important first step because and that was one of the reforms that

the clerks who signed onto that letter ask for. UH. The code provides ethical canons for all judicial employees, including judges, and it's very clear that UH there is a paucity of direction in this code that makes clear that judicial employees UH can report these things and sets out a mechanism to handle harassment should it be encountered in the workplace, Unlike UH members in the private sector even or even in federal executive agencies, there's no recourse if you're sexually

harassed and you're clerking for a federal judge. UH, there isn't Title seven does not cover you in the workplace. UH, and there aren't clear reporting lines like going to the E E O C. So revising the Code of Conduct

for judicial employees is really crucial. Only about forty five seconds here, I just wanted to get your opinion, Debora, about there's been a lot of reporting about things that happened UH sexual inappropriate activity from let's say twenty years ago, where the statute of limitations has run and there was an October sixteenth article about account of a woman who said Justice Clarence Thomas had touched her inappropriately in what

about this going back so far? Well, people are coming forward with these allegations because they are of important public concern. This is a moment where women are finally being believed about these allegations. And they're not coming forward seeking money, They're not asserting legal claims. They're essentially saying that people who hold the public trust need to be held accountable. And that's what happened Kazynski's case. He's paid for this with you know, the ultimate got I've got to stop

you there. We have so much to talk about this, but thank you. New York financier Lynn Tilton is starting the new year on a high note with a record of two out of three court wins. In last Friday, a federal judge throughout the charges against Tilton in a one billion dollars civil racketeering suit, just three months after the Securities and Exchange Commission cleared her of front charges of building investors out of more than two hundred million dollars.

Following the sec ruling, Tilton told Bloomberg TV that she had been completely vindicated. The documents spoke for themselves. They gave me complete discretion, as the judge said, they gave me control over the funds, and as she said, there were no emissions. Everything was reported, Everything was there for people to see. However, Tilton did not fare as well in a Delaware trial. She's appealing to judge's ruling that she was properly ousted as a director from some portfolio

company she claimed to control. My guest is Robert Hockett, professor at Cornell University Law School. Bob tell us about the civil racketeering lawsuit against Tilton and her Patriarch Partners investment firm. Sure. Yeah, so they're basically quite a few moving parts here, But I think we can kind of spoil it down to its essence by noting what the sec suit first amounted to and then understanding the kind of the private suits sort of in relation to that.

So essentially, what you have here is a case of some failing companies. Miss Tilton becomes an owner of those companies with you to turning them around. She also runs, however, a funds which is used to extend funds to the failing firms, which she needs in order to turn them around. Okay, it's a fairly unorthodox arrangement, but there's nothing illegal about illegal about it as such, and all right, So ultimately, of course, the whole plan comes a cropper. It doesn't

end up working out. So the SEC brings a suit against her, alleging that she's defrauded the investors in the funds that she used to extend financing to the failing companies that she was trying to turn around. She actually objects to that SEC suit. She thinks that it's unconstitutional. That was, of course a stilly argument on her part, and she lost it. She was rebuffed there, but the

SEC nevertheless ultimately found in her favor. It said that, Okay, look, she didn't defraud those investors because she had informed them all along precisely how she was going to be operating. And also she had, um, you know, being given a great deal of discretion under those funds organizing documents. Okay, Now, the fund those who invested in the funds weren't satisfied, of course, with the SEC finding. They sued in their own names. So now we have a civil action brought

by private parties rather than by a regulator. They sued her on racketeering claims or racketeering charges. The problem with that suit is that that kind of suit had been foreclosed in the mid ninety nineties um by Congress, right in the so called ps l R A, which was essentially a suit that I mean, a statute that was designed to place limitations on the kinds of civil suits

that could be brought against alleged securities fraudsters. So that suit was thrown out ultimately by the court precisely because the ps l r A prohibited it um. One last thing may be worth noting in this connection is that miss Chilton might be right, and she might not be right when she says that she's been fully vindicated by this most recent decision um. The reason that she might not be right is that this is just the suit was tossed out because it's foreclosed by statute, not on

the merits right. So she could in theory still be wrong on the merits. But we'll never have occasion to find that out because Congress says you can't bring suits like that against people like miss Chilton. So I think I need a diagram now to figure out all these different lawsuits. So Judge William Pauli's decision that found that these allegations were outside the scope of federal racketeering laws. That was not based on a determination that the allegations

were false. That was procedural, right exactly, Its entirely procedural as a matter of essentially whether the law, you know, whether this this kind of suit is permitted. Again, it's a civil suit. This was a private litigation brought at

a civil suit, not a regulatory charge. Uh. And essentially with the court found was that, well, that's exactly the kind of suit that Congress decided no longer to allow in the mid ninety nine when it passed b. S l r. A. So, is there any other way that they can go after her the the you know, the investors as far as the racketeering charges. Is there any other kind of suit or are they dead in the water there? Well, in theory, they could try to go after her on the same theory that the sec itself

had gone after her. But in light of the fact that the s s SEE itself ultimately found that she had not defrauded her investors because she had, you know, even though it was an unorthodox arrangement, she had informed them of everything. And plus again they had entrusted her with a great deal of scratch and lighted the SEC's finding that way, it seems unlikely that any private suit

would succeed here. A private suit that doesn't sound in racketeering might be bringable, but again that would probably lose on the marriage in light of what the SEC itself had found. So, Bob, let's go to lawsuit number three, which she lost, tell us about what the Delaware judge ruled, and she's going to appeal that decision. Yeah, so the

Delaware judge. I mean, so, in the midst of all of this, Um, you know, she ultimately, how should I say, the funds that she was managing in order to raise money that would help her finance her attempts to turn around at the failing companies that she was trying to tournament. Uh, those particular funds ultimately asked her as there as their

may manager. Right. Uh. They auskedd her essentially on the basis that well, this was essentially again the arrangement was so unorthodox and that it was such an inherently conflicted sort of arrangement that it basically presented her with such a conflict of interest that it wouldn't do for her any longer to be on, you know, managing those particular funds. Um and Uh. They asked her on that basis, right, so the Delaware Court. So she sues saying that that's

a wrongful termination, so to speak. Right in effect, she's saying, that was a wrongful separance of my relation with these particular funds. The Delaware court upheld this, but it didn't uphold this on the on the on the basis of a theory to the effect that well, she really was somehow wronging those funds, just saying that the funds themselves have a good bit of discretion when it comes to

determining who they want to be managing them. Uh. And they also have discretion to you know, say, look, we're uncomfortable with the conflict of interest this places her in. Uh. And so we're going to ask her on that basis. I think that's going to be a harder one for

her to challenge. Write the Delaware court, having upheld the fund's decision upheld on unreasonable grounds, on sensible grounds, it wasn't clearly wrong or clearly illegal or clearly in breach of contract for the funds to oust miss Tilton on the grounds that they did. Uh. And so I think her appeal of that particular decision is not likely to prevail. Maybe my big good idea to quit while she's ahead, if I could put it that way. We have about one minute here right now. What is her power? What

is she in charge of? Is she managing? Is she getting money from different things? Where does she stand? Well, she's got other funds now, of course, right, Uh? And so I mean she's still doing the kinds of things she was doing before, which as far as we know, are legal. Right, there's nothing, Um, there's nothing that's kind of the per se illegal or per se shady about what she's doing. What she's doing is unorthodox, and it

does definitely raise certain conflicts of interest. Uh. And could very well be that the law in the distant past would have just flat out prohibited her whole wearing these particular hats in such a way as subjects or to this particular conflict of interest. But the laws that stands now doesn't prevent that. So she's essentially doing the kinds of things that she was doing before now with another firm. All right, Bob, that was an excellent explanation of a

really complicated situation. That's Robert Hockett, professor at Cornell University Law School. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brasso. This is Bloomberg Ye.