Will New York Dissolve the NRA?

in a massive fraud against donors. Attorney General Letitia James claims that top n r A officials, including its longtime leader Wayne Lapierre, have been using the nonprofit organization as their personal piggy bank, illegally diverting more than sixty four million dollars from the organization in the last three years alone.

They use millions upon millions dollars from the n r A for personal use, including for lavish trips for themselves and their families, private jets, expensive meals, and other private travel. My guest is Second Amendment expert Adam Winkler, a professor at u c l A Law School. Adam the New York A g alleged massive fraud, corruption, and self dealing. The breath of it is stunning. What strikes you most about the allegations, well, just the breadth of them. There's

so many allegations. It does seem like the n ra A leadership has been running the organization without much oversight from the board of directors that there's insider deals for directors, there's officers like Wayne Lapierre that negotiated a secret seventeen million dollar conversation package for when he leaves the n r A. Sounds like something you'd expect in a fortune company, not a nonprofit organization like the n r A. William Brewer, the n r AS lawyer, said, the truth is the

transactions in question have been reviewed, vetted, and approved. It seems like that would be a hard defense to make in light of some of these expenses, like the private jets for Lapierre's family and more than a quarter of a million dollars in designer clothes. How can they prove that those kinds of expenses were proper Well, I think they really have no choice because the actual transactions happened.

They can't deny that they happened. And under New York law, profits can engage in some kinds of insider deals, but they have to follow the appropriate procedures and have to be ultimately fair and reasonable to the corporation, in this case a nonprofit corporation. So they really have to say that these are fair and reasonable transactions, because that's the

only way that they're going to survive. Did the allegations come as a surprise to you or have we heard enough in the past with you know, the struggles within the n r A that these did not come as a complete surprise. Well, they were surprising in a few ways. You're absolutely right. There has been a steady stream of leaks coming out of the n r a S lawsuit

with its longtime ad agency, Ackerman McQueen. Ackerman McQueen was responsible for the n ra AS messaging for more than three decades and they really worked hand in hand with the n r A, including creating n r A t V and been the real brain CHILDBND. So much of what we associate at the n r A S message and that lawsuit is very nasty, and a lot of leaks have come out that suggests that there has been malfeasons inside the n r A. But it was nonetheless

pretty surprising these allegations for two reasons. One, there were surprising allegations such as the seventeen million dollar compensation package for Wayne Lapierre that hadn't come out previously, but also that the remedy sought by the New York Attorney General dissolution of the n r A is the kind of remedy that's really reserved for organizations that engage in persistent fraud or illegality. So it was really remarkable and surprising

that such a broad and aggressive remedy was chosen. Well, this isn't the first high profile charity that James has targeted, but the allegations that are sued against the Trump Foundation just pale in comparison to these allegations. Trump dissolved his foundation voluntarily, but the n r A is not going to do that. What are the chances that they would

actually be required to dissolve, Well, it's really hard to say. Obviously, it seems hard to imagine, and that the n r A vast national organization with chapters in every state and training programs for police officers, would actually go out of business. It seems pretty crazy, just in the sense of it's such a big organization, we wouldn't expect to see such

a thing. The Trump Charitable Foundation was put out of business, but it was only Donald Trump and a few people who worked for him who were organizing that charitable foundation. It wasn't nearly the size of the n r A. I think that makes dissolution a little bit less likely, because there's going to be plenty of things that the n r A has been doing that's been perfectly legal and perfectly appropriate. But I think that this is an

opening salvo. In these kinds of situations, regulators often bring their charges to begin the negotiation, and it's really the negotiated settlement that really determines what the remedies will be, and I expect in this case it will probably be something like removal of certain directors or officers, some restitution for some of the deals and transactions that have gone on.

But disillusion is probably not in the cards in the long run for the n r So this is not likely to go to trial in your view, Well, it's hard to say, you know. I definitely don't want to predict the future too much. One of the things about requesting dissolution as a remedy, I think it does sort of put the n l RAS back to the wall and makes it maybe less likely that they'll engage in

the negotiated settlement. If the Attorney General had simply sought to remove certain directors and certain officers like Wayne Lapierre and a point a receiver to oversee the appointment of new directors for a short period of time. It's the kind of thing that could have put pressure on other board members to push for settlement and for a reform. But now that disillusion is on the table, I think it's going to be a long while before we get

a resolution in this case, Adam. The n r A counter suit accusing the Attorney General of violating the group's free speech rights and unfairly targeting the gun rights lobby. Are those strong claims. I think the n r A suit is baseless and not going to go anywhere. Look, these allegations were first brought a light by the n

r rais lawsuit with that agency. No matter who the Attorney General was, whether it was Latitia James who clearly doesn't like the n r A and I said so, or someone else, they would have had to take action in light of the grievous nature of some of the insider deals that the n r A leadership has engaged in. And I don't think that arguing that prosecutors are politically motivated really ever got any defendant very far in a

court of law. It's a parallel lawsuit the Washington d C. Attorney General opened a second front, suing the n r A for allegedly misusing charitable funds to finance improper laverst spending by executives. How does that play into this or does it at all? Is it a separate track? No, I'm sure that these prosecutions are related, that these actions by the Attorney General of d C and the Attorney General of New York are somewhat coordinated, and that they're

sharing information. I'm sure. And it's the same basic set of facts, um. The only differences is that the n r A has two different nonprofit organizations. It's got it's five oh one C three. It's charitable arm that's located in Washington, d C. Chartered in Washington, d C. And that's known as the n r A Foundation. That's the

one that the DC Attorney General is going after. And the five oh one C four the National Rifle Association that we often think about, um, when we think about the n r R that's the organization that's uh social welfare corporation that's formed in New York and that the Attorney General of New York is going after. But that's the same basic set effects. The n r A has

had a lot of political clout in the past. Where does this lawsuit and the in fighting that proceeded it, plus the drain in financial resources, where does it leave its political clout? Well, I think the n r A still remains a very powerful player in American politics because it's cloud really comes from having a bunch of voters that listen to the nl RA and that really care about gun rights and opposed gun control. And I think those voters are still going to make their voices heard

come election day. At the same time, there's no way that all this disorganization and disarray and focus of the n r A on this lawsuit with acrimental Queen and now on the lawsuits by the New York and d C Attorney General, how can that not be a distraction for its top leaders probably won't be able to spend the kind of time and energy focusing on the election

that they'd like to. How much have gun control advocates cut into the n r A financially as well as politically, Well, I think that in the recent years, gun control advocates have made great headway in terms of organization, in terms of money. You know, before the new Town massacre back in the gun control organizations were pretty poorly organized, pretty poorly funded, and the Democratic Party wasn't taking that seriously

issues of gun violence prevention. Now we've seen a real scene change and it's become one of the issues at the very top of the Democratic Party agenda. We see gun control groups that are outspending the n r A in some elections, and they're also affecting the n r A in things like these complaints brought by the New

York Attorney General and the d C Attorney General. A lot of this activity has been revealed through investigations by organization like every Town for Gun Safety and its publication, the TRACE and other advocacy groups working in the space that are trying to reveal the problems with the n r A. So I don't think there's a real separation from what we're seeing from the New York Attorney General and the linkage to gun control organizations. President Trump suggested

that the n r A move to Texas. Obviously, they can't move their assets while this investigation, while the lawsuit is going on. But what about starting over in a different state where the where the laws of the political charities laws may not be as stric M. Well, we might see the n r A and its leadership reform a new corporation, a new organization, a new lobbying group, maybe the National Revolver Association rather than the National Rifle

Association somewhere else. But the key difference here is that it cannot take the n r AS assets with it. It doesn't get the can't take the membership list, It can't take the assets, the buildings and UM, the goodwill and the brand, and all the training facilities and training programs that the n r A has. That's all stuck in New York now, and just re performing a new

organization in Texas is not going to change that. So I don't think that even if the n r A is dissolved, we're not going to see the end of organized advocacy for the Second Amendment and opposition to gun control UM. But it's just not going to be the n r A that's doing it. President Trump is is constantly pushing the idea that Democrats will erode your set an Amendment rights. Do you think that will be a

big issue in the upcoming campaign. I expect that Donald Trump and the Senate Republicans are going to make a big issue out of gun violence prevention. I think both Joe Biden and Kamala Harris have come out in favor of strong, new, aggressive gun control laws. And I think that's something that um or Donald Trump, especially who doesn't have a lot of good things to point to right now in his election campaign, demonizing Biden, issuing warnings about

what law the law is going to be like. If Biden wins, it's pretty much all the president has right now, and I think that will include issues of the Second Amendment and gun policy for sure. Thanks for being on the Bloomberg Law Show. Adam. That's Professor Adam Winkler of a u c l A Law School. After years of legal and regulatory obstacles, Qualcolm's business model and it's no License no Chips policy survives a league challenge from the

Federal Trade Commission. The Ninth Circuit Court of Appeals has thrown out a lower court decision that would have required the chip maker to renegotiate billions of dollars worth of agreements with smartphone makers, ruling that the judge was wrong to side with the FTC in finding that Qualcom had violated antitrust law, joining me as Jennifer Ree, Bloomberg Intelligence senior litigation analyst, This is certainly a major victory for Qualcom.

Shares initially jump more than four percent on the news of the decision. Explain why it's so important, Well, this really was major. Qualcom couldn't have come out better than it came out with this decision. A disrecord had found that the way Qualcolm was licensing its patents was anti competitive, and the licensing of its patents and the royalties are

huge part of Qualcom's revenue. And what the district Court had said is because the way Qualcolm was licensing these patents, that had to go back and had to renegotiate basically almost all of its licensing agreements for certain modem chips, certain cellular chips of different generations that are used in our basically everybody's cell phones, and it would have really

cut into Qualcom's revenue. So what happened here with the appeal is that the appellate court basically just reversed everything. As a matter of law. It said that every single practice of Qualcom that the District Court took through and claimed was illegal monopolization was not, and it erased everything to Qualcom did. It vacated the injunction and it essentially left Qualcolm free just to continue its business practices as they were before the f PC sued them in two

thousand seventeen. So it's a huge one for Qualcom because it preserves this big piece of revenue that they're able to achieve with these patents. The trial Judge Lucy co wrote a really thorough two d thirty three page opinion and Qualcom does have this no license, no chips policy, it's dominant. Why did the appellate court not find that that was enough? Well, you know, it's it's very complicated, and that's part of the reason why the District Court's

opinion was so long. The theories of harm that the FTC put forward are are complicated and and in my mind a little bit convoluted theories, and the District Court had to walk through a lot of different practices and the way those practices into relate in order to reach her conclusion. And that's part of the reason it's so long and so thorough on the no license, no chips policy. Part of the recent Qualcom is able to do that is because it had the i P that was needed

to practice certain standards. When an international standards board shows the standards that would be used for cellular devices to be able to communicate with each other, those standards incorporated Qualcom's i P. So it means it has what's called standard essential patents. And when you have standard essential patents, anyone who wants to practice that patent, and in this case that means any chip maker that's going to supply mobile phone needs to get a lit license from you.

You are required to license on what's called fair, reasonable and non discriminatory terms. So here what Qualcolm was doing was licensing the o e M, the companies that actually make the final product or the cell phone or the iPads, and not licensing the companies that make the chips that

practice the patents that go into those phones. And what the no license, no chips policy said is o E M S, you will be practicing our i P, but you don't have to get a license from US, so long as the o e M that you sell to has a license. And likewise, O E M S, we won't supply our chips to you unless you have a license from US. So it sounds like it's abuse. If

it sounds like it's monopolistic. But the fact of the matter is that in order to create an antitrust claim out of that, you have to show how that claim harmed competition in the relevant market. And in this case, somebody, whether it be the O e M or whether it be the chip rival, must take a license from Qualcom because Qualcom has the i P that goes into the the practice of the O e MS product or the chip. So either the O e M or the chip maker

has the license. And in this case the court said there's nothing wrong with Qualcom refusing to licensees chip rivals and requiring the license to be at the O e M level. That was another piece of that. And once you get to that place, the no license, no chips policy is a little bit different, because what the court saw was that Qualcom saying, hate chip makers. You can go sell the any O e M. You don't have

the license to us. We're not going to sue you for infringing our patents so long as that O M has a license from US, and therefore, in the patent world can legally use our i P. And what the PC had to do to somehow suggest that that was anti competitive was suggest that Qualcom's royalties were so high, so super competitive, that it was able to then undercut with its chips the pricing of its chip's rivals, and that left an O e M better off if it

acquired chip and licensing from Qualcom because it's cheaper because the chip rivals will have to charge more for their ships. They can't charge these low prices that Clock I'm charging because they can't offset it with these high royalties. But in antitrust, based on precedents, the way that becomes an anti trust violation is if it's predatory pricing, and that's what this court said. They said, only if that's predatory pricing, will that violate the antitrust laws. And the SPC didn't

show that it's predatory pricing. You have to show that it's pricing below cost to drive out your rivals to later recoup what you lost in those low costs sales. And none of that was alleged or shown in the trial. That's how this court said the no lessons, no chips policy doesn't violate anti trust laws for entanglements for the company jen the court said anti competitive behavior is illegal

under federal anti trust law. Hyper competitive behavior is not and that seems to illustrate the reasoning behind the court's decision. This was business, tough business, but not anti competitive exactly. They even said later, this is just qualcom with sharp elbos, you know, hyper competitive, aggressive, maximizing their profits, and all of that is fine, and all of that encourages innovation and June, this is exactly why I have been saying

for quite a long time. It's just very difficult for a plaintiff under current US precedent to prove illegal monopolization in court because there's a very fine line between anti competitive conduct and hyper competitive conduct. And the Distretport found this to be anti competitive. It crossed the line from hyper competitive into illegal, and this appellate court said, no, it didn't. It didn't cross that line, and it's simply

hyper competitive. And it's an incredibly difficult determination for any

judge or jury to make. And it's part of the reason why it's hard to prove monopolization because in our courts right now, the prevailing approach is to be more concerned about what's called false positives and false negatives, and false positives refers to finding violations of anti trust law when the conducts did not Endact Calm competition, and they're more concerned about that then finding a false negative, which would be finding no violation when the behavior actually did injure.

And it's exactly what I think Congress is thinking about and a lot of antitrust activists are thinking about right now because they think that emphasis needs to be slipped. They think there needs to be more concerned over false negatives than there is over false positive and this court showed the exact opposite. Their concern was about a false positive and finding that what they thought was hyper competitive

behavior being anti competitive. And this case was unusual because there was a rare split among the regulators where the Justice Department sided with QUA Common actually intervened in the lawsuit. And I'm wondering was the Justice Department's position more of a business decision because there was a lot of talk about how important Qualcom is to five G, and the Trump administration had intervened to stop a broad Com takeover

of qual Calm for that same reason. So how much was five G and the importance of five G to the country involved in the Ninth Circuit's decision. I don't think that it was involved very much. I think only in one aspect. The Court mentioned that the district court hadn't given enough weight to the pro competitive aspects of what Qualcom was doing, but the court didn't really get into it, and I really don't think that the five

G issue really entered into this decision. I think it would have been the same decision whether the Department of

Justice intervened or not. But I do think that that intervention was in part political and related to the desire of this administration for America to be at the forefront of five G and afraid at hampering Qualcom's innovation in R and D. By imposing these licensing restrictions would have hampered qualcom zone R and D and work in five G. But the Department of Justice here the UH making del Raheim, the Assistant Attorney General for Anti trust, has taken the

position in the past that where a company maybe violating its obligations um to license standard essential patents in a fair, reasonable, and nondiscriminatory manner, that that is has nothing to do with anti trust law, that the question as to whether they're violating that commitment is a patent law question and a contract law question, and that it's not a violation of anti trust and that's part of why he stepped in, because the distreport said their failure to um UH license

their patents in the fair, reasonable and non discriminatory manner also violated anti trust law, and he wanted to make the point that he disagreed that he didn't think anti trust had a part in that UH sort of a business negotiation between two parties. The g C hasn't said whether it's going to take any further action. It could ask for a rehearing. It could ask for an on bank hearing of the Ninth Circuit Court of Appeals. It could go to the Supreme Court. What are its chances

in either of those? Very low for both um I don't see the Supreme Court taking this case. And even if they did, with the conservative majority right now and understanding the way it's likely Gorsas and Kabanat would look at this, I think this decision would be affirmed. And with respect to getting a rehearing, you know, this is the second panel of three judges on the Ninth Circuit that has criticized the District Court's opinion. You know, about a year ago, Qualcom asked for a stay if it

is reports injunction and in granting that stay. A year ago, a different panel of three judges on this court said that the District Court's decision had been controversial. Um, and now you have another three basically reversing it. I think that doesn't bode well at all forgetting a rehearing, or if a rehearing is granted, getting any kind of a change in this decision. Qualcom has been fighting legal challenges around the world and regulators around the world for years.

Does this decision basically cement its business model or is it still facing other challenges? Well, this decision only governments Qualcom's conduct in the United States, so uh to the way it licenses let's say in China, Um, that's going to be governed by you know, I think ultimately Qualcom settled all of its issues in China. But however that was worked out which I don't at the moment recall, but I think that there there was some negotiation of

what those rates would be there. Um. So it doesn't really have that much influence on any of its legal skirmishes outside the United States. I mean, those are going to be based on the laws and Europe or the laws in Asia, which are different from those in the US and in particular in Europe, it is that it's quite a bit easier for a finding of what they call abuse of dominance to be found than it is to prove a company as a monopolist in the US.

So now there is still one of the largest consumer class actions ever against Qualcom, where fourteen point five billion dollars in triple damages are at stake. Will this decision affect that case? I think it will um Now that case is under California state law and not under federal anti trust law, and this decision interprets federal anti trust law and the California laws are a little bit different,

but they're not that much different. So I think this decision is going to influence a court that asks whether the conduct violates California's anti trust laws, and so it will be difficult to say, well, it may not have violated the federal laws, that it does violate California's laws. I think it more likely that the opposite will be found.

And we also think June in that case that there was decision on class certification that was controversial and that's up for appeal now, and we think that the class will be reduced we think that decision will be changed, and if you start to reduce the class, it becomes less less and less likely that those plaintiffs are is aggressive because it makes it more difficult to bring the case if the class is very small, or if the

class certification is reversed completely. So we think right now that UM we see qualcom with a leg up on that case this time. One legal expert said that this sort of decision indicates that courts think that antitrust has no role to play in patent misuse. For use, do you agree with that? No, I don't actually agree with that. I do tend to agree with the court's decision that UM some violation of this brand the fair, reasonable and

nondiscriminatory obligation made to a standard setting organization. If there, if there's been a violation of that. In my mind, I think that should be settled in contract law, patent law, maybe toward law. I don't think that arises to an anti trust offense, but I do still think that there are ways that patent rights can be misused that do arise to the level of an anti trust defense. UM, it might be harder to prove that in court after

this decision. So I think this decision is really limited to the way standard essential patents are licensed and and didn't really extend to other types of patent misuse. So I would hope that where there's patent misuse that can cross the anti trust line, that plaintiffs could still have success in courts. Thanks so much for being on the show. Jen. That's Bloomberg Intelligence Senior Litigation analyst Jennifer Ree. For more of Jen's analysis, go to b I go on the

Bloomberg Terminal. That's it for this edition of the Bloomberg Law Show. Remember you can always at the latest legal new was on our Bloomberg Law Podcast. You can find them on iTunes, SoundCloud, or Bloomberg dot com slash podcast Slash Law. I'm June Grasso. Thanks so much for listening, and remember to tune in to The Bloomberg Law Show every weeknight at ten pm Eastern on Bloomberg Radio