This is Bloomberg Law with June Grossel from Bloomberg Radio.
The Supreme Court's conservatives appear poised to give the president control over dozens of independent federal agencies. At oral arguments on Monday, they suggested they will allow President Trump to fire Rebecca Kelly Slaughter from the Federal Trade Commission, despite a law that says commissioners can only be fired for
specific reasons. The liberal justices, like Sonya so to Mayor and Elena Kagan, expressed alarm at giving the president such unchecked authority over agencies that overlook crucial areas like nuclear energy, consumer products safety, and labor relations.
You're asking us to destroy the structure of government and to take away from Congress its ability to protect its idea that the government is better structured with some agencies that are independent.
So the result of what you want is that the president is going to have massive, unchecked, uncontrolled power not only to do traditional execution but to make law.
But the conservative justice is, like Brett Kavanaugh and Neil Gorsuch, say, the real concern is Congress's creation of agencies that exercise executive power but can't be held accountable.
Independent agencies are not accountable to the people. They're not elected, as Congress and the President are and are exercising massive power over individual liberty and billion dollar industries, whether it's the FCC or the FTC or whatever it might be.
Tomorrow, we could have the Labor Commission, the Education Commission, the Environmental Commission, and rather than Departments of Interior and so forth.
In allowing the president to fire the heads of independent agencies, the court would be overturning a ninety year old president called Humphreys executor that protects their independence. My guest is constitutional law expert William Traynor, a professor at Georgetown Law Bill tell us about the issues in Rebecca Slaughter's case against Trump for firing her.
The issue before the screen Court is that Congress puts the limits on when the president and fire the heads of independent agencies. So an independent agency is like the Federal Trade Commission or the Federal Reserve. So really, since the start of the Constitution, Congress has imposed limits on
when the president can fired these people. The question in the case is whether that's unconstitutional, Whether the president can fire the head of an independent agency for any reason, even if Congress has said they can only fire them, you know, if they're engaged in bad behavior. So this is a very big deal. So much of a government structure that protects people in different ways or regulates the
economy is done through independent agencies. Congress has wanted to insulate them from total executive control, and the Supreme Court is deciding right now whether, in fact, the president has the kind of control that comes with being able to fire the leaders of the agencies.
In these oral arguments, you often hear the Supreme Court justices say, well, that's a job for Congress. You know, that's not something that we should be interfering in. So why are they interfering here where Congress has set up these agencies and the rules.
That's a great question. There had been so many times in which the Court is saying, this is a political matter, we shouldn't be deciding. But at the same time, the conservative justices of the Court are very dedicated to what's called the unitary executive theory, which means that the president is in total charge of the executive branch. So what they're saying here is Congress doesn't get to be involved.
The president is in total charge of the executive branch, including what have historically been things like the independent agencies. That is kind of one of the core commitments that has really been at the basis of what Keef Justice Roberts has thought really going back to when he was a young attorney, and that's the same thing for most of the members of the whole conservative wing.
What kind of concerns did the conservative justices express during the oral arguments about this ninety year old President Humphrey's executor.
There are two things that we're seeing the conservative wing of the Court struggle with. One is they want the Federal Reserve to continue to be independent. They don't want the president to be able to fire somebody on the Federal Reserve. And they don't want that because you know, that would be terrible for the economy. If the Federal Reserve is setting interest rates just in order to help the president rather than to help the economy, that would be a disaster, be a disaster for the market, the
disaster for the economy as a whole. So the conservative wing of the Court i think wants to overturn Humphrey's executor, but they're trying to come up with some rationale in which they can say the president can fire somebody on the FTC, but he can't fire somebody on the Federal Reserve. And they're going to be looking at the Federal Reserve later in the term. That's a big concern for them. So I think that animates all of the conservative justices
of the Court. I think also, you know, what I'm hearing with the Chief Justices, what he's trying to do is to come up with some way in which there's some agencies where Congress can in fact limit the president's
ability to fire people. And he's thinking about, you know, are the ones that are essentially kind of judicial in their function, and you know, that may be an area in which Congress can establish requirements or when the prison can terminate somebody, but that's not the Federal Trade Commission. Federal Trade Commission is not making the judicial decisions, you know, it's very much deciding executive type rules. So I think we're seeing two things on the conservative wing of the Court.
One is they're trying to come up with some way in which they can say the President can fire somebody the FDC, but not at the FED. And I think the Chief is trying to come up with some way in which there's some type of agencies in which the president can be limited by Congress, but those would be ones that are really deciding kind of fuzzi judicial matters, not the FDC.
The liberals painted a dire picture of what would happen if Trump wins here. Just as Soto Mayor said to the Solicitor General, you're asking us to destroy the structure of government. Do you think it's that serious.
I think that's absolutely right. You know, we have had independent agencies which largely exists to protect peace with limited power, you know, and they've been in place really for one hundred years. And the idea is that these should be basically bipartisan or apolitical. They should not just be tools of the president. So what the court is considering right now is whether that whole kind of structure gets got it. So the stakes on this are huge.
Well, President Trump wasn't specifically mentioned by name, two of the liberal justices, Elina Kagan and Katanji Brown Jackson, did make broad references to his firing of experts and dismantling of the Department of Education.
That the more realistic danger here is that we'll have an education department, as authorized by Congress by law that won't have any employees in it.
Having a president come in and fire all the scientists and the doctors and the economists and the PhDs and replacing them with loyalists and people who don't know anything is actually not in the best interest of the citizens of the United States.
You know, what we're seeing right now is that in the Trump administration, you know, the independent agencies and all of the government washtoogs, there's an attempt to politicize them in a way that you know, we've never seen before. So the stakes are very different, and they're much higher. If Humphrey's executor has been overturned in President bush forty threes administration, the stakes would have been very different because President Bush was not focused on making independent agencies kind
of the tool for his politics. But that's what we're seeing with President Trump, and that's why the stakes are so high. They've always been big, but in this administration, where there's such an attempt to kind of move away from scientific expertise and neutral decision making to control every part of the executive branch, the stakes are huge. And that's really part of what those three liberal justices we're questioning. You know, the other thing that they really are focusing
in an honor. First of all, it's very very hard to come up with some line where you can say, Congress can limit the president's ability to fire the heads of the sec they can't fire at will the heads of the set. And I can't think of any kind of coherent way to distinguish those two cases. And that's one of the things that the liberals were pressing on. You know, I think they're also pressing on the history.
If you look at the constitutions, the text of the constitutions doesn't say that the president gets to fire people in the executive rection. It doesn't deal with removal at all. So there's not a text that really helps the conservative way of the Court and Congress really, starting in the Washington administration, limited the president's ability to fire people running agencies kind of what was analogous to modern agencies at
the time. So I think what the liberals on the Court are focusing on are the text, the original understanding, as well as the huge consequences of essentially giving the president the power to politicize all of the dependent agencies.
I wonder what happens when there is a democratic president. Do the conservatives then try to limit the ruling they're expected to make.
Here.
You know, one of the reasons why I think that the Court should not overturn Humphrey's Executor is to the extent that you have any kind of political terms, you're giving a democratic president the power to do exactly what President Trump is doing, to politicize every independent agency in the way that that president wants, you know. And then how does a conservative court say, well, you know, Humphrey Executors is back. Once you establish a rule, you know,
it applies to everybody. And that's something that they really have to think true because of the long term consequences, because I don't think they would feel comfortable, you know, with limiting a democratic president after they allow President Trump to fire people whenever he wants.
So then you think this is the end of Humphrey's executs.
Yeah, I think they will completely overrule Humphrey's Executor. I think the one question for me is whether the Chief comes up with some limiting principle in which if there are you know, quasi judicial independent agencies, then Congress can put limitations on the president's ability to fire. But you know, the basic point is I think they're going to overturn Humphrey's executive So I think what the Court will try to do is to say the president can't fire Jerome Power,
can't fire at least a cook. But you know, I don't think that that is a coherent approach, you know, because I think it would be based on history, but the history doesn't support it.
Well. We often see some strained interpretations of history from this court. Thanks so much, Bill. That's Georgetown law professor William Trainor coming up next. The Court grapples with caps on campaign spending. I'm June Grosso and you're listening to Bloomberg. The Supreme Court is considering a Republican led effort to erase yet another campaign finance regulation, this time the federal caps that limit how much political parties can spend in
coordination with candidates. It's the latest in a line of cases where the conservative majority has upended congressionally enacted limits on raising and spending money to influence elections, and two hours of arguments on Tuesday showed the entrenched divisions between the liberal and conservative justices over campaign finance restrictions. Liberal Justice Sonya Sotomayor said that every time the Court interferes
weakening campaign finance rules, it makes matters worse. While conservative Justice Brett Kavanaugh said that spending limits have hurt political parties in an era of unlimited spending by other organizations.
You're telling us that Citizens United and McCutcheon ended up yes in ample find the voice of corporations, but diminishing another voice, that of the party. Now you want to now tinker some more and try to raise the voice of one party. Our tinkering causes more harm than it does good.
That's the real source of the disadvantage. Right, you can give huge money to the outside group, but you can't give huge money of the party. So the parties are very much weakened compared to the outside groups.
Chief Justice John Roberts, a potentially pivotal vote, said he didn't see much difference between contribution limits, which the Court has long upheld, and the caps on coordinated expenditures.
It seems to me that that's kind of a fiction that, oh, you know, they're just coordinating expenditures, they're not making direct contributions.
I don't know in substance what the difference is.
Doing away with the caps would overturn a quarter century old precedent. In the same week, the court appears ready to overturn an ninety year old president and allow President Trump to fire the heads of independent agencies. Joining me is an expert on campaign finance reform, Richard Brofald, a professor at Columbia Law School. Rich Well, you start by explaining the federal caps on spending by political parties in coordination with candidates.
So the Federal Russian Campaign Act, going back to the nineteen seventies when it was enacted in the aftermath of Artegate, places limits on donations to candidates, and it also places limits on donations to parties. It does something else, It places limits on how much parties can give to candidates, on the theory that donors, once they max out on how much the donor can give directly to a candidate, will then just give to a party to chanting the money to a candidate. So there's a limit on how
much the parties can give to their candidates. And that comes up in two ways. One is a literal limit on contributions actually writing a check, but the parties are also allowed to engage in their own spending in support of candidates, and that's called coordinated expenditures. In other words, the party does the spending, they don't give the candidate a check, but they do spending to promote the candidate.
Parties are allowed to do that, but the law places a limit on how much money they can spend supporting candidates. And again for the same idea that if there is no limit on how much they could support candidates through spending. Once again, donors who once they max out on the direct donation to the candidate would then just give to the parties and the parties could then use that money
to basically support their candidates. But parties are allowed to do this in a way that other organizations are not. Packs are not allowed to coordinate at all with candidates, so parties get this extra permission to support the candidates directly, but with a cap on it, and it varies from state to state based on the population of the state.
And what's going on in this case is.
The National Republican Senate Campaign Committee and JD. Vance, who this case began was a Senator and a congressman from Ohio has since retired, have all brought suit challenging this limit on the ability of parties to coordinate their spending with candidates.
And there's a longstanding precedent here.
Almost twenty five years ago.
The Supreme Court upheld this limit in a case called Colorado Republican Sided in two thousand and one, and the Court said yes, because of the danger of conduits a party serving as conduits for donor support, these limits make sense and are constitutional. Well, the Supreme Court is being asked basically now, is to overturn that decision.
One of the concerns of the liberal justices was that lifting the limits on party spending would lead to quid pro quo bribery, so wealthy donors could bypass the individual contribution limits by donating through parties instead.
I mean, that is the major concern of the liberal justices and of a call the campaign finance reform community as a whole, is that this will put another hole in the campaign finance laws and make it easier for wealthy donors to channel money to candidates. There's still limits on their ability to give directly, but this would enable them to give through the parties and so that money would still get to candidate.
So yeah, that is the core concern.
A second concern is, depending on how the Court writes this decision, it could be the green light for further challenges to other aspects of the campaign finance laws, depending on exactly how.
They write this.
So it's both upfront making it easier to channel money from donors to candidates, and also yet one more case eroding Congress's ability to place limits on campaign money.
The Administration and the Republican's argument centers on free speech right as these campaign finance cases since Citizens United have done.
The essential argument is that this is a limit on the ability of parties to speak, and that you don't need it. That the combination of disclosure laws, anti bribery laws, and limits on literally earmarking that's the term, that's use a donation that our donor gives to a party to
be used for a candidate, that that's enough. That those three things banning bribes, requiring disclosure, and saying that when a donor gives a party a donation, they can't literally say this is going to candidate so and so, that that's enough, and that to go beyond that is to constrain the ability of parties as free speech actors, as First Amendment actors, to participate in political process.
Just as Brett Kavanaugh said, you can give huge money to the outside group, but you can't give huge money to the party, and so the parties are very much weakened compared to the outside group.
See talking about super PACs.
And indeed, that is an argument that many people have raised who don't like this law, including people who might
liberals or reformers. They say this law might have made some sense when it was first adopted, but given the proliferation of super PACs and other outside groups, we'd be better off if parties actually had a bigger voice, that parties can play a coordination function, that parties maybe can be a little less extreme than some outside groups, that parties have more of an interest in governance rather than being single issue and that actually if we could start
roll over now that the outside groups have kind of unlimited voice, that anything that strengthens the parties is actually a good thing, and that you see many people who are not conservatives who are taking that position, who are not First Amendment absolutists, but think that in fact, the campaign financ system has gotten unbalanced and it would actually be good to strengthen the role of parties.
And this could do that.
There was also an argument about standing made by those defending the caps that JD. Vance, who's no longer a Senate candidate, doesn't have a stake in the case and thus there's no standing. And then there was a lot of discussion about, well, is he going to run for president? I don't think this standing argument is going anywhere, but it's interesting, so tell us about it.
So Ramond Martinez was the man appointed by the court to defend the law when the government declined to do so, and he opened by saying, this case is a big deal. You know, anytime you're being asked to overturn a president that's twenty five years old, should be very hesitant, and you should make sure that this is a case that's jurisdictionally sound, and he basically said it's not. So this
case was brought by some individuals JD. Vance and Congressman Cheveaux from Ohio, and also by the National.
Republican Senate Committee.
With respect to the two individuals, one of them is actually retired and no longer in politics, So that gets it down to Vance. And Vance has pretty clearly said I don't know if I'm running, or more than point, I don't currently have a plan to run, saying I might run, I might not run. So mister Martinez's argument was, well, this case isn't right. We don't know if he's running, so there's no candidate here to bring it, and therefore there's no plaintiff. He's not a good plaintiff because whether
he's going to run a speculative. He doesn't clearly have a stake in this case. So there were some back and forth on that, but it does seem unlikely. Well, you never know what the Supreme Court, but almost all of the oral argument was really focused on the merits of the case.
It doesn't seem as clear as in other cases. But can you tell where the justices are on this? Gorsuch didn't even ask a question.
It's worth pointing out that in every single campaign finance case the Court has taken since Chief Justice Roberts became Chief Justice and Justice Alito joined the court, the attack on campaign finance law has won.
That's about eight cases.
And turn it around and there's not been a single case that the Supreme Court has taken since two thousand and five on campaign finance law where the law was the state. That's all I think I need to say about that.
Yes, Rich, that about says it all. So in light of that, there were also questions about what's next. Justice Katanji Brown Jackson basically asked the Republican's lawyer, former Solicitor General Nol Francisco, if these caps on coordinated expenditures go down, what's next the caps on contribution limits?
In McCutcheon, your clients filed a brief saying that the sky wouldn't fall if the court struck down aggregate limits because we still have coordinated expended truths. And now here we are today with your clients saying no more coordinate expenditure limits. And so I'm wondering if, and I think others have sort of raised that concern as well, we're going to be back here with the other kinds of limits you with you making the same kinds of arguments.
Well, your honor, I think different limits are on stronger footing than others. I am not going to say that my clients are not going to come back and try to challenge other limitations.
And indeed, it's the lawyer for people who are defending this law, which I should say is not the government. This is a federal statute. Well, the Trump administration will not defend it. In fact, they'e actually joined in the attack on it. So the statue was being defended by two lawyers. One was a lawyer pointed about the Court to speak for the statute, in addition the lawyer for the Democratic organizations, and they both argue that basically this is the bait and switch that's been going on in
campaign finance law for a long time. Someone says, well, given changes in the law, this particular restriction does make any sense, so you should strike it down. And then they come along and say, well, now you've struck down this one, the next restriction doesn't make any sense either, so strike that down. And there seems to be kind of a salami tactic aspect to this. A number of the justices are very very skeptical, more than skeptical about
the constitutionality of the contribution restrictions. They don't have to decide that in this case, but the Court has traditionally treated coordinated expenditures as the constitutional equivalent of contributions. If they're going to start protecting coordinated expenditures more saying that they're more protected from limitation, it's not a big leap to say that. That kind of thinking would also apply to the contribution restrictions.
Finally, if by chance, the Court were to uphold the spending caps, would you be surprised, fall off your chair? Surprised or mmm, that's interesting.
Surprised, Well, probably fall off my chair.
I mean when the Court upheld this law in twentsand and one, it was a five to four vote them. And in terms of just the carmentary this Supreme Court, I'm not sure if Justice Barrett has written on a big campaign finance case, but all the other Conservatives have and they've been rather consistently skeptical campaign finance.
The record you cid it does seem to indicate that this cap is the next to go. Always great to have you on, rich That's Professor Richard Braflt. Of Columbia Law School. Coming up next on the Bloomberg Law Show. Will investment funds be facing more lawsuits by activist investors? Remember you can always get the latest legal news by listening to our Bloomberg Law podcast wherever you get your favorite podcasts. I'm June Grasso when this is Bloomberg.
I think this case is extremely close. I'll just put cards out there on that.
And that deduction by Justice Brett Cavanaugh seemed correct because Wednesday's eighty minute oral argument at the Supreme Court didn't give a clear indication about the likely outcome. Wall Street is watching the case over whether to allow investors to broadly use an eighty five year old law to sue funds over their management decisions. A lower court had allowed activist investors led by SABA Capital Master Fund to sue eleven closed end funds, including some affiliated with FS Credit
Opportunities and Blackrock. Justice Sonya Soto Mayor pointed to the legislative history of the Investment Company Act to show that Congress intended to allow private rights of action.
I know that many of my colleagues don't believe in statutory history, but here we have both a House and a Senate reports, a company, the nineteen eighty amendments to the ICA, and in both the House and the Senate reports it says that quote, private rights of action for violations of the federal securities laws are a necessary adjunct to the secs and for enforcement efforts.
But in recent decades, the Supreme Court has avoided finding private rights of action unless Congress expressly authorizes them in a statute. And Conservative Justice Neil Gorsich was critical of allowing so called implied rights of action.
Pretty disastrous for our system of government, where the people are supposed to write the laws that govern them, not judges.
The Trump administration is backing the mutual funds. Joining me is securities law expert James Park, a professor at UCLA Law School. Jim tell us about this legal fight.
Start sort of from the beginning. You have a hedge fund SABA Capital, and one of its strategies is it buys stock in mutual funds, mutual funds that are closed and did which means that they have stock trading in secondary markets. And the ideavia on the strategy is you buy a substantial stake and you influence the governance of the fund. You might think that it has poor governance, and then that should increase the price of the stock.
That's what activist stock investors typically do, and then you hopefully sell at a profit. And so they did this for a number of mutual funds, and the funds basically tried to take away their right to vote. There was a state law in the state where they were formed which said that you know, if you pass a resolution, you can take away a shareholder's right to vote unless a majority of the other shareholders basically give it back. And this is, you know, almost a takeover defense sort
of thing. It reduces their influence on the company's governance. And so what SABA Capital is arguing is that that violates a law, a federal law called the Investment Company Act, which is passed in nineteen forty, which is meant to regulate mutual funds. The Investment Company Act basically says that shareholders are supposed to have votes proportionate to the number
of shares that they own. And so what SABA the Capital was arguing is that we have a private right of action to sue and the remedy should be recision, which means basically, we get our money back. And so there's a question as to whether the Investment Company Act authorizes a lawsuit like this, because the language does not come out and say in a very straightforward way that you have the right to sue for violations of the
Investment Company Act. And so the only way you can say they have a right to sue is to say there's something called an implied remedy here, sort of an implicit right to sue that the Court can basically say is evident from the law.
The Second Circuit Court of Appeals, which handles a lot of these kind of financial cases and is well respected, do it allow a private right of action?
They did.
They basically did in a different case. And Judge Laval, who is a very prominent, respected Second Circuit judge, said that the statute has language that can be read to indicate that Congress intended for private parties to be able to bring suit for recision when there is a violation of the Investment Company Act, and he mainly based his
argument on the text. The text of the law says, you know, if you hihilated the Investment Company Act, then the various agreement that you entered into with the mutual fund is unenforceable. It talks about, you know, in certain circumstances, recision should not be denied by a party if the benefit of recision outweighs some of the downsides. So there is language that indicates that Congress might have envisioned these private lawsuits happening, but it's not set in a straightforward way,
and I think that's what made the question ambiguous. And in fact, the Third Circuit and a number of other circuits have held the opposite and said that there is not an implied right to sue under the Investment Company Act, and Meeting Court generally has not favored these implicit rights, which are not straightforward in the text of the statute.
And what were the concerns of the justices about allowing a private right of action?
There were, you know, a number of concerns, and they mostly focused on the statutory interpretation argument as opposed to broader policy concerns. And you know, I think that they were concerned that the language was not completely straightforward and that there were some really difficult issues of interpreting what the statute meant. Justice Kavanaugh went so far as to say this was a very close case, that there were
good arguments on both sides. Some of the more liberal justices pointed to the legislative history, and the legislative history actually indicates that Congress thought that there would be an implied right of action, And there were some reports senate in house reports which said that the envisioned investors could sue. But a lot of the more conservative justices, as you may know, they don't really like to look at legislative history.
They like to look at the text of the statute, and so a lot of the oral argument was puzzling through how we read this language. That's basically what the argument was mainly about.
I thought it was interesting that Justice Sodomayor prefaced her remarks about the statutory history by saying, I know many of my colleagues don't believe in statutory history. She also referred to these private lawsuits as being in conjunction with the SEC's enforcement efforts. But if you have private investors bringing their own lawsuits, does that interfere with the SEC's enforcement plans.
Definitely. The mutual fund industry has taken the position that the statute is meant to be enforced by the SEC rather than private plaintiffs, and that the SEC can come in if there's a violation of the Investment Company Act and bring various enforcement actions. And you know, I think the response to that is the SEC has limited resources.
There are a lot of these mutual funds out there, a lot of potential violations, and having private attorney generals who are able to bring these suits maybe a more effective way of enforcing these provisions. That was not really discussed much in the oral argument. I think that argument has fallen a bit out of favor with the more conservative justices, but definitely the mutual fund industry believes that it's really the sec that should be bringing enforcement actions in this space.
What about suing in state court rather than federal court. Here's what Justice Kavanaugh said, So.
It's a federal court state court issue. As I see it, like this is going to happen. It's just going to happen in federal court or state court.
There is also a lot of discussion about that possibility that maybe what the statute means is that the contract is unenforceable if there's a violation of the Investment Company Act, and so then there would be litigation in state court about the enforceability of the contract, And so that was seen as a possibility. Have there ever been suits like that. I don't know, and I think there would be a little bit complicated, you know, especially the types of theories
that you might want to bring. Federal courts may have a bit of an advantage over state courts in hearing these types of issues, and so it would be a bit awkward to say that these claims would mainly be brought in state court as opposed to Federal Court if you want to have this be an effective remedy in my view.
Jim, can you give us a sort of simplistic explanation of the position of each side here on the merits of the case.
On one side, the investors might argue, we need some remedy, we need a clear remedy when there are violations, and you know, recision is a pretty powerful remedy under the Investment Company Act, which was meant to regulate mutual funds.
On the other hand, I think what the mutual fund in as worried about is that you're going to get a flood of lawsuits and that that might actually be bad for most investors in the mutual fund because only a few investors might be interested, insuing, I'm only a few investors may be pursuing an activist strategy with the fund, and so the other investors may not be all that interested, and it's costly to defend these lawsuits, and those costs
come out of the pockets of the other mutual fund shareholders.
It was hard to read the argument, although it did seem like the liberal justices and perhaps the Chief Justice and Justice Kavanaugh, might favor allowing the private lawsuits. But what was your take?
It's close. I mean, my guess is I actually think that they will find that there is a right of action based upon the text of the statute. I think there is enough in the text of the statute to persuade at least some of the conservative justices. Is that Congress intended for there to be a private right of action for recision, I think the more liberal justices will be persuaded by both the text, the legislative history, and
policy considerations. So I think they'll need to get a couple of the Republican justices to decide with them, which I think is very possible. It's not a sure thing, but just my sense of the argument. If I felt like Saba Capital might have had a bit of a better argument in terms of the text on the statutory interpretation issue.
And do you think that it's the correct decision to allow the private investors to.
Sue As a policy matter, I think the risk that it's going to lead to a flood of lawsuits may be low. We'll have to see though. And my colleague at UCLA for non Restreppo, actually has a study that he just completed that looked at what happened after the second Circuit allowed these lawsuits, and he didn't find a flood of cases, and he didn't find a big impact on the mutual fund industry. These are preliminary results, he tells me, and so he may, you know, find something
different as he delves into the data. My sense is that, you know, SABA Capital is a little bit of an outlier in terms of pursuing a strategy like this. Most activist funds are targeting public corporations rather than mutual funds. Now, it might be that if you know you have more rights and more leverage, that more funds may get into this space. But it is a strategy that does require you to make a pretty substantial investment in the mutual
funds so that you have significant votes. And it's a little bit different than some of the shareholder lawsuits we see with public companies, which have been criticized because you know, you have plainers who own only a few shares who have a right to bring a private action represented by an attorney in a class action, and so that might be the reason we see a lot of litigation in the public company space. I don't know if that will
necessarily be true with respect to mutual funds. And you know, the other thing to keep in mind is the imply right of action is also just for recision, which means the remedy as you get your money back, as opposed to damages. That may also have some impact on the incentives of plaintiffs to bring a lot of lawsuits for violations of the Investment company Acts.
What's an investor lawsuit without damages? Thanks so much, Jim. That's Professor James Park of UCLA Law School. And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast, Slash Law, and remember to tune into The Bloomberg Law Show every weeknight at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg