This is Bloomberg Law with June Brusso from Bloomberg Radio. The US Supreme Court opened a new term today, and in the next nine months, an outside share of the High Court's biggest cases will come from the ultra conservative Fifth US Circuit Court of Appeals, whose far reaching rulings are proving impossible for the justices to ignore. Cases involving federal regulatory power, guns and social media regulation will test just how far the Supreme Court's conservative majority wants to
go in remaking the nation's legal landscape. Joining me is Bloomberg New Supreme Court reporter Greg Store. Greg just how conservative is the Fifth Circuit.
It's unquestionably the most conservative federal appeals court in the country, and it gets an awful lot of cases, so we notice it even more than other courts. On this court, twelve of its full time judges are Republican appointees and only for our Democratic appointees. And six of those Republican appointees are appointees of Donald Trump. And you know, they include some justices who are really trying to make a
name for themselves with some really far reaching rulings. And so it's kind of consistently the place where conservatives go when they are looking to push the law in a certain direction.
There have been a lot of stories about the Texas judges who have become the go to judges, for example, for Republican states that want to sue. Tell us about the Trump appointees on the Fifth Circuit, because what seems unusual about them is they're not only conservative, but several of them made statements before they became judges that staked out very conservative positions on issues like abortion and gay marriage.
Yeah. So there's also one who while on the bench has made some really remarkable statements. That's James ho He's a Trump appointee. He's described abortion while on the bench as a moral tragedy and written that if there's too much money and power politics, because there's too much government. And then there's some other judges that really drew a lot of controversy when they were nominated. A guy like Corey Wilson, who had written that gay marriage is a
pander to liberal interest groups. Another judge, Stuart Kyle Duncan, who has written a lot of things in opposition to LGBTQ rights, and he was a judge who drew that protest at Stanford Law School, where protesters shut him down, wouldn't let him speak. So he's very much a lightning rod.
The Fifth Circuit hasn't been bearing that well at the Supreme Court. To me, it's taken the position the Ninth Circuit used to take, where it was the most reversed circuit for so many years. So tell us how it's done in the past year.
Not very well. So in the last Supreme Court term, in seven of nine cases, the Court decided if at least partially or largely reversed the Fifth Circuit. And the way it's different just to go back to the Ninth Circuit. The way it's different is the Ninth Circuit I had a well deserved reputation back in the day as being very, very very liberal, and the Supreme Court, even when it wasn't as conservative as this Court is, would say, no,
we're not going to let you do that. Ninth Circuit. Here, it's a case where the Fifth Circuit is trying to sort of go beyond where the Supreme Court has gone. It is a conservative Supreme Court, and we have the Fifth Circuit trying to push the envelope even beyond where the Supreme Court is gone do.
Some of their decisions seem like decisions that the Supreme Court almost has to take or it will allow the law to be, you know, even further out or even more conservative than the Court envisioned.
Yeah. So a number of the cases the Supreme Court has this term are cases where the Biden administration is appealing and there are cases where the Fifth Circuit struck down something that either an administrative agency or Congress did. So one example, there is a law that says the people subject to a domestic violence restraining order can have their Second Amendment rights gun rights taken away. The Fifth
Circuits that, Nope, that law is unconstitutional. The Biden ministry came up to the Supreme Court, and really, in that sort of situation, the Court almost has to take the case. So we're going to now see what the Supreme Court thinks about that interpretation of the Second Amendment.
Yeah, that's guaranteed to be one of the biggest cases of the term. And my favorite line from that really was the Fifth Circuit saying that while the defendant there Raheemi was quote hardly a model citizen, he was entitled to Second Amendment protections. And this is a defendant who not only had a restraining order against him by his former girlfriend, but also shot his gun in public I think five times. So not exactly a model defendant for a case like this.
No, And in fact, if you're a Second Amendment advocate, a really bad defended to have in a case like this. You have both this law that protects again something that is pretty commonly understood to be a very very dangerous situation to somebody with a domestic violence restraining order having access to firearms. Also have somebody who a judge found
had engaged in all sorts of criminal violent activity. And the confluence of those things make it a case where, even with this conservative Supreme Court, it's going to be pretty hard for them to explain why mister Rahimi is somebody who is entitled to keep his Second Amendment right.
The Supreme Court has several cases that may allow it to expand its attempt to rein in the administrative state, and a couple come from the Fifth Circuit coming up tomorrow oral arguments in the Consumer Financial Protection Bureau's funding system. The second time I think the CFPB has been before the Court. So tell us about this Fifth Circuit decision.
Yeah, it is the second time the CFPB has been up before the Supreme Court. This case has to do with how the bureau gets its money. It gets its money through the Federal Reserve system. It doesn't rely on the year to year congressional appropriations, and that was a part of Congress's design and creating the bureau after the two thousand and eight financial crisis. They wanted to give the CSPB a certain amount of independence, shielded from the
political processes. And what the Fifth Circuit said was this system violates the constitutional provision that says government spending has to be done via a congressional appropriation. Now, in the past, courts, in concluding the Supreme Court have said that provision is something that keeps the executive branch from spending money that Congress hasn't authorized to be spent. Courts haven't used it to restrict Congress and the way they can set up
an agency. Well, the Fifth Circuit did in this case. So it's a novel constitutional approach. There's not a whole lot to go by in terms of precedent, and it's going to be very interesting to see how the Supreme Court deals with that and then what it decides to do if immediate agrees that the system is unconstitutional.
There's another case, and it's the SEC and its use of in house judges. Another issue that's been before the court. And the Fifth Circuit found three different problems.
With the three different problems, two of them are sort of connected and that may be kind of the biggest part of the case. The Fifth Circuit said that under the Constitution, folks hit with an SEC complaint in many cases have a right to a jury trial, meaning the SEC cannot bring those cases before an administrative law judge at the agency. They have to go into federal court.
And then the related aspect of the ruling is the Fifth Circuit said, and Congress did not give clear enough guidance to the SEC, clear enough principles to decide which cases it's going to take before the administrative law judge and which case is going to go to the Supreme Court. The final issue is that the Fifth Circuit said that the job protections that the administrative law judge is that the SEC have leieve them too insulated from presidential control.
That's an issue the Supreme Court is considered in slightly different contexts before. So if the Supreme Court wants to rule against the sec. It's got kind of a menu of ways they can do that.
Coming up next on the Bloomberg Lawn Show, I'll continue this conversation with Bloomberg New Supreme Court reporter Greg Store, and we'll talk about Justice Clarence Thomas recusing himself from a case involving January sixth. Last term, the Fifth Circuit did not fare well at the Supreme Court. The Court at least partially rejected the Fifth Circuit's position in seven of nine cases this term. Fights are teed up over the Fifth Circuit's decisions on federal regulatory power, guns, and
social media regulation. Here's former US Solicitor General Gregory Gar's take on the Fifth Circuit's role this term.
That's truly, you know, one of the broader themes that we're seeing this court. And some people have said it's sort of the Supreme Court versus the Fifth Circuit. It's interesting. I mean, the Fifth Circuit is now the most conservative circuit among the many, and you know, the kind of question that all these cases present is whether the Fifth Circuit has got out ahead of even the US Supreme Court today in terms of how conservative it is and whether or not the US Supreme Court feels as though
it has to rein it in a little bit. And although this Supreme Court is certainly one of the most conservative in history, as we saw last term, there's still a few justices in the center that are not necessarily as comfortable going as far as some of the justices at the far right want to go. The Chief Justice Justice Capital and so in each of these cases, the spotlight is really going to be on those justices in the middle and whether or not they're comfortable adopting these broader theories.
I've been discussing the Fifth Circuit with Bloomberg New Supreme Court reporter Greg Store. Two cases that the justices just decided to take up last week involve free speech, the rights of social media companies, and a Fifth Circuit decision that clashes with an Eleventh Circuit decision. The eleven Circuit probably the second most conservative circuit in the country.
It is a very conservative feels court as well. These are laws that were put into place by Republican controlled states Texas and Florida, and they basically dictate the social media companies how they should go about managing content and removing misinformation, and they have rules about what they have to say when they take down a post online, and the social media industry trade groups sued and said that violates our First Amendment rights. The Fifth Circuit upheld the
Texas law so that law would go into effect. Under that ruling, the Eleventh Circuit struck down much of Florida's law. It's a little bit different. The eleven Circuit devoted much of its focus to a provision that requires a detailed explanation every time a social media company makes a content
management decision. So this is going to be a big both First Amendment free speech fight and a political fight since a lot of this is about, you know, posts that make political statements and you know, talk about things like whether an election was fair.
The Supreme Court could also take up a Fifth Circuit case on the abortion pill MiFi Pristone Greig. This decision by a conservative Texas Christian federal judge which went to the Fifth Circuit, has already been at the Supreme Court once.
Yeah, so right now, the abortion pill is fully available, and that's because the Supreme Court several months ago issued a stay that kept the pill fully on the market while this legal fight goes forward. That was a significant
win for Biden administration and abortion rights groups. The question is basically whether the Food and Drug Administration, when it approved the drug considered all the things that was supposed to do, and then later on when the FDA under Joe Biden and Barack Obama expanded access to it, allowing things like mail order allowing the drug to be mailed to people directly and meaning they didn't have to go to a doctor obtain it, whether those things complied with
the rules that got administrative agencies. The district judge you reference blocked the drug entirely, or said he would have blocked the drug entirely. The Fifth Circuit eased up on that a little bit. Instead, some changes that were made starting in twenty sixteen to widen access to it. We're going to block those, And for the time being everything is on hold. The drug is fully available, but the Supreme Court has not yet said whether it will take
that case. The Biden administration has filed its appeal. It'll probably be later on this year. Again, this is one of these cases where because the appeals court said the federal government has done something wrong and the administration is appealing. It's the kind of case the Supreme Court almost always takes the Supreme Court is going to consider whether the FBA you took some shortcuts or didn't fully consider what it was supposed to consider when it expanded access to the drug.
I thought when the Supreme Court issued this stay, they were sort of telling the Fifth Circuit, you know, we don't want to deal with this, But the Fifth Circuit just went ahead.
Yeah, the Fifth Circuit essentially reaffirmed what it had suggested previously, saying that these changes that allowed mail distribution, for example, were in violation of the law. And so it did not take that message from the Supreme Court that it was supposed to the back full access to this drug. And now we'll see. You know, sometimes when the Supreme Court issues in emergency order a stay order, you know, sometimes it's a very good indication of how they're going
to come out on the marriage. But as we saw in the case last term involving Alabama and redistricting and the creation of a second majority black district in the state, sometimes that's not the case, and sometimes the Supreme Court goes in a different direction. So this will undoubtedly be a very very hotly contested fight.
How long does the Supreme Court stay remain in effect. I mean the Fifth Circuit has already issued its decision twice.
Yes, the Supreme Court stay remains in effect until they either say no, we're not going to take the government's appeal, or until after they take the appeal and resolve the case. So the stay essentially keeps the drug fully available until the Supreme Court makes a final decision one way or another.
IRV.
Gornstein of Georgetown Law Center said some of the Fifth Circuits decisions that will be reviewed this term may well be affirmed. Not every one of them was delivered from crazy Town, but it would be shocking if at least some of those decisions are not reversed. And that seems to be the problem. These decisions are not just conservative, but their novel. They just seem not wedded to precedent.
You know, some of them are taking on new issues. The appropriations clause issue is one that hasn't really been tested, at least not recently. And some of them, you look at the gun case, for example, the Rehimi case, when the Supreme Court ruled on the right to carry a gun in twenty twenty two, the Court said the test is going to be history and tradition, and you're suppose, judges, you're supposed to look and try to find a historical
analog for some current regulation. And if you can't find an historical analog, that's a pretty good sign that this provision is unconstitutional. And that's the analysis the Fifth Circuit went into. And so as it comes back here, the Supreme Courts in the position of saying, well, you took
that a little too far. So, you know, in some cases it is the Fifth Circuit going off on its own, and in other cases it's you know, at least arguably taking what the Supreme Court has given it and running with it.
That landmark Second Amendment Supreme Court decision seems to need some clarification because it's causing confusion in lower courts. Before you go, Greg, I want to talk about Justice Clarence Thomas recusing himself today. Tell us about the case he recured used from.
So this is an appeal by John Eastman. He is the former lawyer to the President Trump. He is somebody who is under indictment as part of the Georgia case legend a criminal conspiracy to overturn the election. And this case stems from efforts by the House committee investigating the January sixth attack to get his emails, and he was arguing privilege. And Justice Thomas, who heretofore has not recused for many January sixth related case, did recuse from the
Court's decision not to hear John Eastman's appeal. Now, Justice Thomas did not give any explanation for it. It's by no means clear that he is having a change of heart. There are reasons why in this Eastman case, maybe in his mind it's a little bit different. John Eastman is a former law clerk of Justice Thomas. These emails, report from Politico about a year ago, included some back and forth in which Eastman says that in the course of the twenty twenty election fight that the best hope was
to get something before Justice Thomas. So the emails may well talk about Justice Thomas directly, but in any event, it is a noteworthy moment because Justice Thomas did refuse himself.
There's been a lot of pressure on Justice Thomas to recuse himself, especially in the January sixth cases. But what you're saying is this may just be an isolated instance.
It's possible, it's really Again, he didn't give an explanation. Some justices do give an explanation. That's something that the Court as a whole has been trying to do a little bit more. But it's kind of justice by justice, and he gave us no indication why. So we're left to speculate. And I certainly am not going to sit here and say I am now confident he's going to refuse from every January sixth case because that is probably not the case.
Probably not. Thanks so much, Greg. It's a busy term ahead. That's Bloomberg News Supreme Court reporter Greg Store coming up next on the Bloomberg Lawn Show Inside JP Morgan Chase's Year of being Haunted by Jeffrey Epstein, and later in the show, the trial of Sam Bankman freed on front charges,
begins tomorrow. JP Morgan Chasing Company has reached settlements with the US Virgin Islands and former executive Jess Staley overties to Jeffrey Epstein as it seeks to end its legal woes over its banking relationship with a notorious sex offender. The biggest US bank tentatively agreed to pay seventy five million dollars to the US Virgin Islands, a tiny number for the firm which generates that much revenue in about
five hours. Joining me is Bloomberg Legal reporter AVA Benny Morrison, whose story is entitled Inside JP Morgan's Year of Being Haunted by Jeffrey Epstein, was the top bress at JP Morgan's surprise to learn that the Virgin Islands was pursuing a claim against them having to do with Epstein.
Apparently so they sne our reporting. We know that before this case even got to court, the US Virgin Islands sat down with lawyers for JP Morgan and laid out the findings of their investigation, alleging that they violated different banking laws and essentially accusing the bank of facilitating Jeffrey
EPs seen sex trafficking. There was a bit of a sense, I think that the bank wasn't taking it as seriously as maybe they should have, and there seems to be an element of surprise I guess from JP Morgan's point of view that the US Virgin Islands ended up proceeding with that case.
The damaging revelations about the extent of JP Morgan's relationship with Jeffrey Epstein sort of kept trickling out bit by bit. How did Jamie Diamond and other officials at the bank view that drip.
I think that it was a little bit mixed and there was some sort of inflection points in the legal strategy in this case. Nalas came out of the gate very strongly. Was a lot of pretty compelling evidence, you know, the contents of thousands of emails from inside JP Morgan that gave us a bit of an insight into the discussions that were going on around how to manage Jeffrey Epstein.
But then the JP Morgan came back a few months later as his case was going on and playing out in the court, and they got their own emails showing what was going on with Jeffrey Epstein and different government figures in the US Surgeon Arms as well from the bank side. I think the like you mentioned, the drip drip drip of different emails from Mary Urdos, from different people sort of around Jamie Dimont, but not Jeremy Dummon himself, was a bit of a public relations headache.
Diamond eventually was deposed over seven hours. What do we know about that deposition?
Yes, that's right. I judge ordered that He put aside two days to be deposed, but the deposition only ended up taking one day, and it was lawyers for all parts he is involved in this litigation, so lawyers for the US Virgin Islands, lawyers for Jane Doe, which had also reached another settlement with the bank, and lawyers for former banker Jess Stay. It took about seven hours and there was a three to four hundred page transcript of the deposition that was released afterwards.
Did he talk about meetings with Epstein or communications with him.
No.
He was very very strong in his denials of really knowing anything about Jeffrey Epstein. He said he never met him, he never spoke to him, He didn't have any decision making ability over his accounts or how he was managed as a quiet. At one point during his deposition he said, the first time I heard of the guy was in twenty nineteen when he was charged with federal sex trafficking.
Charger Jess Daley tell us about that how that evolved.
When JP Morgan wrapped up its case with the US Virgin Islands last week, it also reached a agreement with Jess Staley. Jeff Daly was a long term executive at JP Morgan. He had a very long standing professional relationship
and a friendship with Jeffrey Epstein. JP Morgan had sued Stay a few months ago, arguing that he should be held liable for any damages or boarded against it in this broader Epstein litigation, saying that he vouched for Jeffrey Epstein when he shouldn't have, and they didn't really know the extent of Epstein's behavior because Staley was seeing his
praises constantly. So JP Morgan has reached some sort of agreement with Staley to end that lawsuit, but the terms of that settlement are confidential, so we don't know yet if there was money involved or what the exact conditions were.
That's seventy five million dollars is much much less than what the Virgin Islands initially asked for, that's right.
JP Morgan and the US version settled for seventy five million. That includes twenty million dollars in attorney fees. Initially, based on our reporting from different sources, the US Virgin Islands had wanted three hundred million, which would have put it on par with the settlement JP Morgan reached with Jane Doe victims of Jeffrey Epstein earlier this year. A couple of months ago, they said publicly that they wanted one hundred and ninety million in penalties and fines from JP Morgan,
So seventy five million is considerably less. But I would point out that the US Virgin Islands has gone to great length to say, yes, seventy five million is less than one hundred and ninety million that we'd asked for a couple of months ago. But they claimed that JP Morgan has agreed to make certain concessions internally anti trafficking concession to make sure something like this doesn't happen again.
Seventy five million, and the bank generates that much revenue in about five hours. So they had a very tough strategy against the Virgin Islands. What made them decide to settlef Finally, did.
You know we were approaching a decision on summary judgment. So both sides had made their arguments to the judge as to why he should ruin their favor before trial, and I think that was always going to be a sort of a good time for these parties to come back to the negotiation table. We had heard that settlement talks and mediation had broken down a number of times over the past several months, and there'd been a lot of embarrassing revelations to come out about JP Morgan and
the US Virgin Islands. So it seemed like both sides were just ready to maybe stop the public relations blowback, but they were both receiving and finally reach your conclusion, did.
All this in public take a toll on the reputation of any of the upper echelon at JP Morgan or the bank itself.
When we talk about Jamie Diamond, I think that he has done a pretty good job at coming out of this unscathed. Always said that he had nothing to do with JP Morgan's accounts. There was one sort of loan email from a staffer inside the bank referring to Epstein's accounts and the status of them being subject to pending Diamond review, but that didn't really go anywhere. But I think that one of his trusted lieutenants, Mary Urdo's, it's
been a little bit more harmful for her reputation. She had a lot more interaction with Jeffrey Epstein when he was alive. She had been to his house. She was the executive that went around and fired him personally in twenty thirteen.
So is this the absolute end of the problems that JP Morgan Chase has had with Jeffrey Epstein.
I'm sure they hope. So the judge still needs to sign off on the Usgon Islands and JP Morgan settlement, which will probably happen over the next several months. In terms of whether we will see any more revelations about how j Morgan handle Jeffrey Epstein, I don't think so. It's all been all the bad laundry has really been aired out over the past several months.
Let's turn now to a trial that starts tomorrow. Sam Bankman freed. So prosecutors have called this one of the biggest frauds in US history. What is he accused of exactly.
That's right. He is accused of misappropriating billions of dollars at FTX, which was one of the world's biggest cryptocurrency exchanges. At the core of this case is an allegation that he allowed Alimit research because of his crypto hedge funds that he started in twenty seventeen to essentially draw down on customer funds whenever it wanted and however it wanted. Those funds were then used allegedly on high risk trading real estate purchases in the Bahamas, multi billion dollar loans
to executives. Sam Bang mcfred is pleaded not guilty to all seven of the fraud charges against him.
Do we know what his defense is going to be.
We have hints of what his defense is going to be. Generally, defense teams hold those defense strategy pretty close to their chest until the trial begins, but we've been able to glean some signs of what it might shape up to be from different legal filings. He may want to talk about the presence of council, so that there were lawyers at FTX and at outside firms advising FTX on many
of the things that prosecutors say were wrong. He may also want to talk about cryptoregulation and laws in the US because FTX was an international exchange and much of them misappropriating was happening around the international exchange as opposed to the US arm And he may also talk about his intent and that he had acted in good faith and he didn't have the unlawful intent That is a key element improving fraud.
Who are the main witnesses for the prosecution.
Three main witnesses that everyone is really looking forward to hearing from three former executives who were very close to Sam Bankman Freed. That is Nishad Singh, Gary Wong, and Caroline Ellison. Ellison was the head of Alameda Research and she also dated Sam Bateman Freed on and off over
the past few years. So I think that she her evidence in particular, is probably that will be keeping an eye on because she will probably speak to the relationship between Alimeda and FTX, talk about what Sam Bangman Freed knew about Alimeter accessing customer funds.
And he's facing a judge who not only just recently decided that he wasn't complying with the terms of his bail and threw him into jail, but also has said that he could be facing, if convicted, a very long sentence exactly.
And the judge has really served a number of blows to Sam Bateman Freed's defense. He has sort of hinted at different defense strategies he might pursue in his pre trial motions. The judge has ruled in favor of the government in precluding a lot of those arguments, including the presence and advice of Council Defense and making the argument
during the opening statements later this week. So it's been an uphill battle for him, along with having his bow revoked several weeks ago as well, that's been really difficult for him to work on his case full time.
Jury selection starts tomorrow. I know you're covering the case for us EVA, so we'll be checking back with you. Thanks so much. That's Bloomberg Legal Reporter Eva Benny Morrison, 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 bla Boomberg 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