Metaverse Privacy, Shadow Docket, Musk vs. Twitter

Is this lawsuit for real? Bloomberg Law with June Grasso from Bloomberg Radio. Welcome to Bloomberg Laws Show. I'm Lydia Wheeler and I'm Kimberly Robinson. We're in for June Grosso. Coming up on the show, we'll discuss the U. S. Supreme Court's latest COVID action and the increasing use of

the courts so called shadow doctor. The first Bloomberg Law reporter, Andrea Vittorio joins us to talk about the new extended reality experiences that technology companies are promising in the metaverse and the privacy pitfollows that could come with collecting more data from users. Andrea, thanks for being here. Can you start off by explaining what an extended reality is and

what types of technology it typically includes. Sure, so I asked this question myself in writing this story, because there are many different kinds of reality and UM, there's sort of regular reality on one side and then virtual reality on the other, and that's where UM, there's a whole virtual world. You have a virtual version of yourself and you can participate in virtual activities like games or events like concerts or shopping. So UM, that's sort of what

we think of when we talk about the metaverse. There are also versions in between where you can have holograms imposed on real life or UM you can see digital characters like Pokemon go um in your everyday activities. So the virtual realities that we are talking about can mean a lot different things. And so what are the digital experiences that extended reality companies are promising users. It doesn't seem like we're talking about just games here right right.

There are a lot of potential applications. UM. Gaming is definitely one of them. UM that is learning. There are schools that are experimenting with virtual reality for students. There's also corporate training that can happen in virtual reality. You can help firefighters or doctors learn their craft UM just by practicing in additual environment UM. And they're just a lot of different UM use cases that we kind of are seeing explored. But UM could brawn now like theme parks,

travel shopping. There's a lot going on there in the metaverse. So what kinds of data are our companies collecting from people who use these sorts of extended reality devices? And is any of its sensitive information? The data collected can depend on the device or how you're using it UM, but there are a lot of potential collection points, like when you wear a headset can gather information about like

how your head is moving, what you're looking at. UM. You can sometimes hold devices in your hands that will track your hands are moving or what sides they are even So UM these are all considered um pretty personal pieces of information because they really varied by person UM and can even sort of amount to identifying a person if you have enough information about them and how they

move and what they look like. So, UH, try to be advocates or concerned just about the um physical characteristics or traits that are being gathered about people as they use these devices. Right in your story that you recently wrote, you refer to you know, tracking these movements as a kind of thumb print of your movements, which I thought was really interesting. And I'm wondering do companies have to get permission from users before they can collect this kind

of data? And if so, how do they usually do that? Right? So, permission is kind of interesting concepts, like when you're in a virtual world and you're interacting with different uh people or with places, and there's sort of different touch points

where you would need permission. So there's sort of like the base level of permission of using a device and creating accounts, but then um, when you play a game or some other sort of activity in the in the virtual world, um, you're interacting with another business potentially, and so they would have to potentially ask for permission to

gather information about you. Or if you go and buy something in the metaverse, then maybe you have to agree to private people healthy of the merchant selling you something. So UM, permission to gather information or touse information could be many layered in this virtual world. Are there any laws in place, either at the state or the federal

level to protect this kind of digital data? So far, we have been thinking about privacy laws UM in virtual worlds just sort of as applying existing laws to the space and UM. So in Europe there's a rule called the General Data Protection Regulation that would um probably apply these general privacy rights to UM different platforms regardless of where you are, So it would apply um in the metaverse as well as just sort of auto website UM. But then in the US it might kind of depend

on different state laws since there's no national privacy law here. UM. So there's still a lot of questions around, like how do these laws apply? And like especially how do how do location base laws apply when like I might be in one physical place using a device, but I might be going somewhere else in the world in my device, So does that change like where the laws of that place would apply to me or whether the laws where

I am physically apply to me. So, um, there's still a lot of policy questions around, uh, how existing laws might fit or um if we need to have new laws written specifically for this space. Well, thanks so much. That's Bloomberg Law reporter Andrea Vittorio. You're listening to Bloomberg Law. Next up will bring in the University of Texas law professor Stephen Bladdock to discuss the U S. Supreme Courts

COVID rulings. I'm Kimberly Robinson and I'm Lidia Wheeler. This is Bloomberg Y. This is Bloomberg Law with June Brasso from Bloomberg Radio. I'm Lydia Wheeler and I'm Kimberly Robinson. We're in for June Grasso. We turn now from the metaverse to the COVID pandemic, which has upended life worldwide, including at the U. S. Supreme Court, to discuss how the justices have dealt with the health crisis. We bring in University of Texas law professor Steven Laddock. Thanks so

much for being here with us. Oh, thanks for having me so. On Tuesday, Justice Sonia Sotomayor refused to block New York City's requirement that employees here a New York City Police detective, be vaccinated against COVID nineteen. There was no explanation from the court, but we've seen the justices block other vaccine mandates and allow other requirements to stay in place. Do you have an understanding about why the

Court have might have rejected this particular request. Yeah, I mean, I think if you look at the overall body of work and there's actually a fairly substantial number of cases where the Justices have been asked to block various COVID restrictions. UM. The cases that have succeeded, basically with I think one exception,

invariably fall into one of two categories. Either they are religious liberty based challenges to COVID restrictions, whether it's a vaccine mandate or a limit on how many people can gather in the same place. UM. Or it is a challenge to a federal policy on grounds that the federal policy exceeds the statutory authority that the relevant agency, the Centers for Disease Control and Prevention OSHA right that they had.

And so with one exception, and the exception is the New York State eviction moratorium, every single case where the Supreme Court has agreed to block a state or federal COVID policy the grounds of been religious liberty or you know, federal administrative law. You mentioned those in person gatherings in particular, and I was, you know, on religious gatherings, I should say, and I was curious, how did the justices analyze those

specific requests? Yeah, you know, I mean, as you guys know, part of the trick here is that very very few of these rulings should actually come with opinions for the court. UM. But so there were a series of cases, you know, starting in the summer of and really culminating in the summer, where UM, religious groups others challenged, you know, gathering restrictions, especially in New York, UM in California. And you know, this is I think one place where we saw the

confirmation of Justice Barrett have a huge shift. UM. So in the summer of the court was actually denying these requests to block the gathering restrictions. UM. In one or two cases, one from California went from the VATA by five to four votes, and it was Chief Justice Roberts joining the liberals in those cases. UM. And one of those cases, the case called South Bay Unitependent Constal Church UM.

To Justice Roberts wrote separately to say, you know, I'm not unsympathetic to the claims that these planets are making, but this is you know, not something we should be resolving on an emergency application. UM. You know, the sort of things are changing on the ground, the policies are shifting, UM, and so we should give at least some latitude right to the government decision makers. UM. That shifts quickly when Justice Barrett's confirmed, so that you know, within a month

of her confirmation UM in November. Now it's five to four the other way in a pair of cases blocking

you know, New York's restrictions on religious gatherings, UM. And in the first of those cases, the case called Roman Catholic Diocese of We've got a very short, unsigned opinion for the Court that says, the problem with these restrictions is that they are treating you know, religious worship more harshly than they're treating other forms of essential secular businesses, and that that becomes the dominant problem that the Justice is find with whole bunch of these um, you know,

state gathering restrictions during the pandemic, which I think is part of why we saw so much action through these cases, only when the claims were about religious liberty as opposed to other due process or other constitutional rights. So you mentioned that a lot of these cases, most of them in fact, came up through these emergency requests. I wanted to talk a little bit about the so called shadow doctor.

Can you first explained to people what that even is? Sure, So it's it's sort of it's a catchy term um that will Bow the Professor Chicago coined in UM to describe basically all of the traditionally boring stuff the Supreme Court does. You know, we spend most of our time thinking about like the fifty five to sixty big merits decisions the Court hands down each year dabbs, you know,

the gun case, etcetera. And as you guys both know, I mean, the reality is that, at least by volume, the overwhelming majority of what the Supreme Court does is actually not those It's these unsigned and usually unexplained orders UM. Most of these or anodyne right. No one really gets exercised about extensions of time to file briefs UM, even when the court is denying sorceerarity, that is to say, refuse them to take up an appeal. You know, that

doesn't often make headlines. But what we've seen in the last couple of years, as we've seen more and more of these orders, especially when parties are asking for emergency relief, especially when a party is saying, I want to appeal a decision from a lower court. While I'm appealing it, I want you to block this state policy. UM, We're seeing the court not only sort of here and and

take seriously more of those, but grant more of those requests. Um. And that's coming you know, without oral argument in almost all cases with limited briefing, um, oftentimes through orders that have no explanation, and if they have an explanations, through a short explanation. UM. As you guys know, well, these orders can come at all times a day or even

in the middle of the dice. And so I think, you know, the COVID pandemic was in some respects a flashpoint for how much the court is due through these unfined, unexplained orders, um. And really for how those orders can have massive real world effects even when we have no idea why the court is doing what it's doing. And Steve, you know, as you mentioned just you know, just now that it seems like you're a big critic of the

shadow docket. And you know, because these cases are coming before the court, we're not getting or argument, we're not getting you know, opinions. What's can you put into perspective though? What's the harm in the fact that we're not having like a fully briefed case and arguments before the court? Yeah, I mean, I think there are a couple of harms. I mean, as to be sure, I don't think the shado adopted is first say a bad thing, UM Like, there are going to be emergency and the court has

to have a way of dealing with them. I know that the trouble comes when you have the court basically issuing an unsigned, unexplained order, let's say, blocking a California COVID policy for example, UM, in a case where first the lower courts actually had detailed hurings and took significant evidence um and actually you know, did a bunch of fact findings to support their their conclusions that what California

was doing with above board. But second where the court then turns around and says, hey, lower courts, you are bound to follow our unsigned, unexplained order in this case.

And so I think the problem the shadow doctor creates is not just that it's a compressed opportunity for the court to do its job, but that it also deprives the court in the typical case of the ability to provide the kind of lengthy, principled rationale that you know, guys, we may not agree with, but at least we understand and that you know, the relevant parties, the local and state governments, the lower courts can figure out how to

apply in future cases with you know, marginally different facts. We don't have those in most of these orders, and I think that's part of why, you know, the proliferation of these decisions, especially in context in which the justices are treating them as creating precedents. Um is I think hard to defend. Coming up next will continue our conversation with the University of Texas law professor Stephen Addic. I'm

Lidia Wheeler and I'm Kimberly Robinson. This is Bloomberg Y. This is Bloomberg Law with June Grasso from Bloomberg Radio. I'm Lidia Wheeler and I'm Kimberly Robinson. We're in for June Grasso. We're back with Professor Stephen Bladdock of the University of Texas. When we left, we were talking about the courts shadow docket and how most of the COVID

cases came up through uh that procedure. Of course, there were two major exceptions that was on the on two federal vaccine mandates, one that the Supreme Court upheld and another more broader mandate that the Supreme Court struck down. Can you tell us Uh. These cases started on the shadow docket themselves, though, right, Yeah, and actually I think we could even probably debate whether they were even exception so the right. There were two sets of really high

profile challenges to vaccine mandate from the Biden administration. One was the Osha um proposed emergency rule that would have required every large employer to impose a vaccination or testing requirement on their employees UM. And the other was a rule promulgated by the Center for Medicare and Medicaid Services that basically required all health care facilities that received federal Medicare or Medicaid funds to a whole lot of them

UM to require their healthcare workers to be vaccinated. So they both came to the Supreme Court through the shadow docket. The the Osha mandate UM was not blocked by the Sixth Circuit UM, and then a whole bunch of parties fifteen different sets of applicants asked the Supreme Court to issue an emergency stay of the ocean Man date Um.

The CMS mandate was blocked by two different district courts on a nationwide basis, and the Biden administration came to the Supreme Court um asking for emergency relief in the form of stays of those injunctions. And so what the court did, I think made it look like it was less shadowy is for the first time nearest we can tell, since like um, the full Court decided to hear oral argument on the vaccine mandates, and they did, you know,

in early January, UM. And they turned around about a week later and handed down these you know, unsigned procureum for the court opinions UM, where they blocked the Ocean

rule and unblocked the CMS rule. And you know, I guess, guys, to me, those cases are a remarkable bell weather because first, you know, the fact that the justices saw fit the whole argument I think was a bit of a concession that they realized that, like you know, the normal shadow doctor process was insufficient for cases of the of that magnitude.

But second, you know, there's a line in the majority opinion in the Ocean case where the you know whoever wrote it, we don't know who did, um talks about the equities and how you know, the federal government said if you block the Ocean mandate, all these bath rooms will happen. The Balingers, including a bunch of Red State said, if you don't block the mandate, these bad dems will happen. And then the Court says, it's not our job to

balance those trade offs. Um. And I have to say, guys like that, that line, as someone who studies this like kind of set me spinning, because it's actually exactly the Court's job in the context of these kinds of

emergency application to balance those trade offs. And so I think you know, in that respect, these cases were actually this perfect encapsulation of how the shadow doctor has evolved, of how more and more high profile disputes are being resolved through these expedited processes, and how in that context where the Court is supposed to be balancing the harms to each side, UM, the Court is really increasingly just deciding what it thinks the right answer is on the merits.

I want to talk with you more about how the shadow docket has evolved, UM, because I know you've been following a change in how parties and the justices use the shadow jacket. So can you talk talk about those

changes in particularly those changes under the Trump administration. Yeah, I mean, so you know it used to be, as I said, we've had the shadow docket forever um and the historically the body of cases that were the source of the most shadowed doctor activity involved the death penalty, where you know, you'd oftentimes have last minute applications from death row inmates for stage of execution or if a lower court had blocks and execution, and lasting application from

a state to unblock the execution and real these guys into the tens. Like that was the majority of what was interesting about emergency applications in the Supreme Court. The shift in the Trump administration is a shift in just the kinds of cases that are ending up on the shadow dockets, and cases with not just massive implications for

one death row prisoner, but for state or federal policies. So, just to take one data point, um, during the Bush and Obama administrations from two thousand one seventeen, two pretty different administrations, the federal government fils a total of eight emergency applications in the Supreme Court, so one every other

year on average. During the Trump administration, so four years, the Justice Department files forty one application and I think, you know, the there's a longer conversation to to sort of be had about, you know, the sort of what

caused that uptick, whatever caused it. Right, what it means is that there was a lot more UM nationwide policy challenging going on on the shadow docket, where you know, it started as like the travel band, that it turned into a case about the transgender band, you know, immigration, environmental law. All of a sudden, right, every major contentious UM challenge to staateard federal policies is coming to the

shadow docket. And I think that's the shift that has led to why this has had so much more of an impact on all of us. Well, thank you so much for that. That's University of Texas Law professor Steven Bladdock. You're listening to Bloomberg Radio. Up next, we'll talk with Bloomberg News reporter Jeff Feey about Elon Musk his fight to get out of his forty four billion dollar Twitter deal. I'm Kimberly Robinson and I'm Lydia Wheeler. This is Bloomberg.

This is Bloomberg Law with June Grasso from Bloomberg Radio. I'm Kimberly Robinson and I'm Lydia Wheeler. We're in for June grass Ow. Elon Musk has been engulfed in a legal battle over his failed forty four billion dollar deal to buy Twitter. He's now claiming a whistle blower's allegations against the company should let him walk away from that purchase agreement. Joining us now to talk about this litigation, as Bloomberg News reporter Jeff Feely, Jeff, thanks for being here,

no problem. Can you start off by telling us a bit of background about this litigation and how it came about? Yes, Uh, it came about because Mr Musk, the world's richest man, decided he had agend own Twitter, which he is a very frequent user of that platform to tweet out the various things that come to his mind, and he decided that maybe it would be good for him to buy Twitter. So he back in April, offered fifty four dollars and twenty cents a share of the social media platform, waived

his due diligence on the deal, and signed well. When the market turned a bit and Twitter's stock value fell, Mr Musk was not happy and he decided that maybe he didn't want Twitter as much as he thought he did, so he decided to cancel or walk away from the billion dollar deal. Well, the fox at Twitter, understandably weren't happy about that, and so they filed suit in Delaware

chancery court to force him to consummate the deal. The reason they came to the first state is because under the merger agreement, that was where all legal disputes had to be litigated. Delaware has a long tradition of its business courts handling merger and acquisition disputes. So that sort of gets us to where we are. And so we've discussed before on this UH show about the whistle blower

who recently came forward with allegations against Twitter. Can you tell us a little bit more about that and what it is that they're alleging is happening at the company. Sure. The whistleblower's name is Peter Zako. He's a well known hacker, um and pardon me, computer security expert, and he was Twitter's ahead of computer security for a while. While at Twitter, Mr Zako says that he raised issues about the number of spam and robot accounts that are embedded in the

company's customer base. Uh. These accounts are not basically ones with humans hid them, but they are you know, uh, put on there to increase people's audience, if you will, and um, he claims that the folks of Twitter had no idea how many of these accounts were, you know, part of their customers, and really didn't seem to care to delve too deeply into it, because you know, the more customers they have, the more they can charge advertisers.

So if they if they you know, I didn't want to dig into it, it's because they didn't want to reduce their advertiser numbers. So Mr zach Coo got fired for performance issues a couple of months ago, and he has now come forward and lodged a so called whistleblower's complaint with regulators and UH congresspeople. And those complaints include laxity of computer security, a district art for privacy issues, and this whole issue about the spam and robot accounts.

Those accounts are important because Mr Musk has made them the centerpiece of his legal arguments, saying that he's justified and walking away from the deal. Isn't elon Musk here um asking the court to kind of amend his argument um, and is the judge in this case likely to allow him to do that. He is asking to amend his counterclaims. So Twitter has filed the actual suit. Mr Musk has filed his defenses and counterclaims to those, and those counterclaims

focused solely on the bot issue at first. Well, now that this gentleman has come forward talking about security issues and privacy concerns, he wants to amend his counterclaims to say that these are other legitimate bases for uh POEMA rug out from the deal. Under Delaware law, UH judges have wide authority to amend and it's basically granted as long as it does not prejudice the other side in

some way. So most people think that Judge McCormick will allow some amendment to add these other issues to the case. And do you think that these whistable or allegations are ultimately going to help must break the deal with Twitter. Well, we really don't know at this point. It's too early to tell whether Mr Zako's allegations have so called meat on the bones or sour grapes by fired employee. UH people really need to dig into them to find out

whether there's substance or not. What is Twitter said in response to Musk, you know, using the whistleblower complaints in his defense. Well, they have said that Mrs obviously they are the ones who who notice, who let people know that Mr Zako was fired for performance issues. They also have said that his complaint is quote it old with inaccuracies closed quote. So um, again, we're going to have to wait and see whether the rubber meets the road

on these issues that he's raised about Twitter's operations. And do we have any sense about how many Twitter users are really body accounts or are really real or is that just an unknown at this point? Apparently in the industry, the social media industry, this is a problem. It's a problem trying to figure out robots from humans. Um. Twitter has more than two d and thirty million customers, it has said in its regulatory or securities filings with the SEC.

But it believes the bot and scam accounts are somewhere about five round five of their customer base. Mr Musk and his experts have done some preliminary analysis and they postulate that it could be as much as a third of the thirty million plus customers who are not humans. The reason that is important again is that you can only really make money with advertising from humans with eyeballs

watching the ads. And you know, if the Twitter folks you know, have written their sec disclosures in a masterful way to headge them. But if there turns out to be a major discrepancy, you know, and there's many more bots than five percent, that could be a problem for the deal. So has this dispute hurt Twitter in any way? I mean, our market shares down. Shares are down. Shares are down as part of an overall drop in the

technical sector as well, but shares are down. And I do believe this whole fight has certainly had an effect on Twitter. They have said that the uncertainty has cast a cloud over the shares. It's caused unrest among the employe ease, there's been you know, a significant brain drain, and you know, it's just it's just not it's not a pretty it's not pretty optics either about the way Twitter operates and how it handles things, and this whole

stuff about the box. It's just not pretty. Well, you can understand why Twitter would want to get this trial over. Then when is it slated for? And also I read that Musk is trying to delay it. What's the strategy there? So the trial right now is set for October seventeenth in beautiful Wilmington, Delaware, and it is. Of course, chancery court is a business court, is a non jury court. So Judge McCormick will hear it by herself and then

render a decision some months afterwards. Uh. Mr Musk originally wanted to have the trial in February. He wanted to have a nice long time for discovery and everything. But the Twitter folks wanted to fast track it. They wanted, you know, they said the uncertainty was hurting the company, so a quicker decision would be better for them. So Judge McCormick sort of split the baby. Twitter asked for September, Musk asked for February. She said it for mid October.

Now Mr Musk is saying, with the emergence of Mr Zacho, the whistleblower, there's going to be some more time needed to dig into his claims, analyze them, and figure out the implications for the case. So they had originally asked for November, and some court filings yesterday today our sources are saying they're even thinking about asking for early December for a trial date. Interesting, Um, can you tell us who's been subpoena in this case and if those people

could end up as witnesses. Well, it would take a couple hours to tell you all the subpoenas because there's been over a hundred of them. But we've we've had some big names. Jack Dorsey, the former CEO Twitter, he's likely, I suspect he's likely to testify. We've had Larry Ellison, the head of Oracle, he's an investor in the case. Um, there have been investment vehicles tied to Mark Andres and the very famous tech investor. That's that's a pretty good start.

And so a judge ordered Musk to disclose all of his potential investors. How calm and could those people end up being witnesses too? Well, I think the judge was trying to get a sense of the universe of investors and advisers to Mr Musk, and to get an idea of whether or not there might be a second equity race, which is possible. Um. You know, there's a bunch of

funds who have um invested in the deal. I mean he raised he did a first equity raise of over seven billion dollars for the deal, and you know there I think there continues to be some conversations among folks. So Twitter is entitled to know who they're talking to. So that's why McCormick ordered them to give up both the names of the investors and the potential investors. And that does it for this episode of Bloomberg Law. I'm Lydia Wheeler and I'm Kimberly Robinson. This is Bloomberg