Mangione's Psychiatric Defense & Judges Misbehaving

17 Jun 2026 · 36 min · 13 chapters

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In short

The episode covers three legal stories. First, it discusses Luigi Mangione’s upcoming New York State murder trial for the December 2024 killing of UnitedHealthcare CEO Brian Thompson. Guest criminal defense attorney Jeremy Saland (former Manhattan prosecutor) explains Mangione’s planned “extreme emotional disturbance” (EED) psychiatric defense: Mangione would admit the killing but argue he acted under overwhelming, objectively reasonable duress/anxiety, potentially reducing murder to manslaughter. Saland says proposed bases like back injury pain or health-care-system frustration are “dead in the water,” and emphasizes the defense likely requires medical experts and could introduce health-care-system evidence to sway a sympathetic juror. He notes EED differs from insanity and that the federal case likely won’t go away.

Second, Bloomberg Law reporter Jacqueline Thompson covers alleged judicial misconduct: Judge Eleanor Ross (private reprimand for affair and attending a partisan event), Judge Ryan Nelson (parking-lot altercation misdemeanor; Ninth Circuit inquiry), and Judge Thomas Ludington (drunken driving no contest; alleged probation noncompliance). She describes how chief judges/circuits handle complaints and possible impeachment.

Third, securities law expert James Park (UCLA) explains a Supreme Court 6-3 ruling: the Investment Company Act doesn’t allow implied private rescission suits by investors in closed-end fund disputes, limiting activist investors’ options and shifting enforcement toward the SEC.

Written by AI. May contain mistakes. Listen to the episode to check what was said.

Chapters

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Mangione's Psychiatric Defense

0:30 to 0:49

An in-depth analysis of Luigi Mangione's use of a psychiatric defense in his upcoming trial.

“Small businesses are the pulse of every community.”

Mangione's Psychiatric Defense

0:53 to 1:40

An in-depth analysis of Luigi Mangione's use of a psychiatric defense in his upcoming trial.

“The thing about AI for business, it may not automatically fit the way your business works.”

Mangione's Psychiatric Defense

1:46 to 13:53

An in-depth analysis of Luigi Mangione's use of a psychiatric defense in his upcoming trial.

“until the start of Luigi Mangione's New York State murder trial, and his defense has finally been revealed.”

Mangione's Psychiatric Defense

14:34 to 15:18

An in-depth analysis of Luigi Mangione's use of a psychiatric defense in his upcoming trial.

“Public is an investing platform that offers access to stocks, options, bonds, and crypto.”

Mangione's Psychiatric Defense

15:49 to 16:30

An in-depth analysis of Luigi Mangione's use of a psychiatric defense in his upcoming trial.

“easy to get started and even easier to use.”

Judicial Misconduct Cases Overview

16:30 to 19:30

Explore recent high-profile misconduct cases involving judges.

“sitting at the bench and holding others accountable for their bad behavior.”

Judicial Accountability and Public Perception

19:30 to 24:18

Discuss how judicial misconduct impacts public trust in the courts.

“The chief judge can either take initial steps on their own.”

Potential Reforms and Future Implications

24:18 to 28:00

Examine possible reforms in the judiciary following misconduct incidents.

“We see articles of impeachment filed over rulings and not over conduct.”

Judicial Reform and Conduct

28:00 to 28:50

Discussion on the judiciary's reform opportunities and potential Congressional actions.

“And then if the Senate also has the appetite for taking up a trial is another question.”

Potential Reforms and Future Implications

28:50 to 29:46

Examine possible reforms in the judiciary following misconduct incidents.

“That's Bloomberg Law Reporter Jacqueline Thompson.”
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Supreme Court Ruling on Investment Company Act

30:11 to 30:59

Analysis of the Supreme Court's decision affecting private rights under the Investment Company Act.

“Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter.”

Implications of the Supreme Court Decision

30:59 to 35:56

Exploration of the decision's impact on activist investors and potential future legal avenues.

“The justices said that power belongs exclusively to the Securities and Exchange Commission.”

Future Legal Avenues for Activist Investors

35:56 to 40:16

Discussion on possible future paths for activism in the closed-end fund industry.

“I don't think that this SEC is really inclined to expend resources to support activist hedge fund investors, but you never know, right?”
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Transcript

Automatic transcript. May contain errors.

0:00What if you could have more wins? More support? More sound effects? At LPL Financial, we like the sound of that. Because LPL offers more. Advisors, what if you could have more ways to help your clients? Ready to invest? What if you could find an advisor that really understands you? When it comes to your finances, your business, your future, at LPL, we ask, what if you could? Paid advertisement. Investing involves risk, including potential loss of principal. LPL Financial LLC member FINRA SIPC. Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth.

0:36Chase for Business helps business owners like you with personalized guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business.

1:06The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. This is Bloomberg Law with June Grosso from Bloomberg Radio. It's less than three months until the start of Luigi Mangione's New York State murder trial, and his defense has finally been revealed.

1:55Mangione plans to assert a psychiatric defense, claiming he was suffering from extreme emotional disturbance when he gunned down UnitedHealthcare CEO Brian Thompson outside a Midtown Manhattan hotel in December of 2024. This defense is not the same as a not guilty by reason of insanity defense. If the jury accepts the emotional disturbance defense, it won't absolve Mangione of the killing, but it could free him from prison sooner. My guest is criminal defense attorney Jeremy Saland, a former Manhattan prosecutor. Jeremy, is it not surprising that Mangione is going to assert a psychiatric defense in a case where the evidence seemingly against him is overwhelming?

2:44To a certain extent, anyone who has knowledge of the law in criminal defense is not shocked, meaning it's incredibly difficult, especially after the failing at the suppression hearing by the defense. And I say that not as a negative to the defense. It's very difficult generally to beat these things. But when that weapon is coming in and you have the manifest or diary and you have a video, you're going to say it wasn't me, it was a one-armed man. It's just not likely a good defense. So this is the next best thing. But, but remember, this defense is not a defense of I didn't do it, therefore I'm exonerated.

3:23It's I did it with a but and an asterisk there to minimize the exposure on the back end to a manslaughter from a murder. So this is different from a traditional insanity defense that people may be familiar with from TV and the movies. He's claiming extreme emotional disturbance. So explain the claim. So basically, it's an objective analysis, if you will, from the perspective of the accused, that at the time of this particular incident, he was under such extreme emotional disturbance, duress, anxiety, that it was so profound to him and it was so overwhelming that he lost control. And if you believe that, if that's proven by a preponderance of the evidence by the defense, because it's their burden, always the prosecution's burden to prove the murder beyond a reasonable doubt, but this affirmative defense is on the shoulders of the defense.

4:21If that piece is then proven, then you go to the analysis of, was this extreme emotional duress and disturbance reasonable given the circumstances, again, from that objective perspective, and that it really caused him to act in the way that he did. So those are really the prongs that you have to review when a jury would decide to make the determination whether this defense is applicable. I've been reading what various legal experts have been suggesting might be the basis for this emotional disturbance defense. They could argue that his physical pain from a back injury or his frustrations with the health care system caused him extreme emotional distress.

5:04Do you find either of those convincing? I think that's not to sound a little callous here. It's dead in the water. I just don't see it. So I had a matter, without going into too much details, where a client was accused of shooting a person in response and retaliation, allegedly, of sleeping with his underage daughters. And the argument was, in that moment, he was so upset that he found out this guy was bragging about doing this horrible things to his daughters that he lost his mind, for lack of a legal term, and it was so overwhelming, and he took that person's life. As opposed to, I don't like the way you're talking about my daughters.

5:40I don't like what you're doing here. You know what? The system is corrupt and it allows people to do these things. So I'm going to hunt you down over weeks and days and find you. It doesn't add up for me, but I think it also also allows the defense to bring in what they might not have been able to bring in before to try to get that. Maybe that juror who says, you know what, I'm not going to go with the rest and we're going to hang this because now you can bring in the health care system. Now you can bring in the wrongs potentially of that system and why it caused this guy to act as he did, assuming that this defense moves forward.

6:14But I still don't see it as a winner. I see it as an attempt to run away from what is the likely reality here with the evidence, but I don't see it as a winner. So if he uses this defense, he's admitting that he killed Thompson. Correct. So you're now taking away that ability to say it wasn't me or some other defense. But again, that wasn't going to be the defense anyway. So, yes, he's acknowledging, saying, I murdered him with an asterisk because if this affirmative defense applies, then it gets knocked down to a man one, a manslaughter charge. The reason why that's relevant is instead of having up to life on the back end and say, for example, 25 years on the bottom end.

6:53On the man one, on the manslaughter, it's a B-violent felony. It's a mandatory minimum of five years and a maximum of 25 years. So realistically, is a judge going to give him if he's convicted five years? Absolutely not. But it gives him a life outside of incarceration as a young man, potentially down the road, as opposed to the risk of never seeing the outside of a cell. Since he's admitting to the killing, would it change anything in the prosecution's presentation of the case? Regardless, I think they're going to be methodical of the preparation and the planning and the scope and magnitude of all the steps that Mangione allegedly took that ultimately culminated in this homicide and this death.

7:37So I think the defense was likely going to go through this anyway. So does it change it? You're arguing a little bit different because you want to deprive him of the ability to use this defense. But I am guessing, guess may not be the right word, I believe, based on my training experience, that the prosecution was going to challenge us anyway. But what I think the prosecution has to be prepared for now is there may be by default with this defense, some more evidence that's going to come in to mitigate and they have to be that much more diligent to make sure they don't get that one juror or two jurors on there who might be swayed by this outside noise about the healthcare system.

8:15Was there any other defense available to them besides he didn't do it or, you know, suffering under emotional distress? I mean, I think people were waiting and this was under seal for this or something similar. It's not, again, that traditional insanity defense. Not to sound glib here. It's not one flew over the cuckoo's nest. You know, it's not Nurse Ratched, you know, putting him in an institution. This is I was so overwhelmed in that moment, objectively, from my own perspective, that I did this. That really has to be the angle and the avenue because there really is no other defense. Once they lost the suppression, if they beat the suppression, it's a different animal.

8:53But now they are really locked in. And keep in mind, whatever he says or does here is going to be memorialized in a transcript for what is done and used later on at the federal trial. Granted, the charges are a little different, but nonetheless, he's going to be locked in. And the question will be, how is that coming in? Is it coming in? Is he going to testify? Is it going to be coming in through an expert only? you know, medical health professional. So there's gonna be a lot of questions, but got to keep an eye on that federal case, which is hanging in the balance. And do you think this kind of defense requires a medical expert's testimony?

9:26Well, how else are you going to establish that he had these mental health issues that were so overwhelming and he had such great duress and distress and disturbance? You're going to need professionals and experts to help elaborate on this. Absolutely. And someone's gonna have to explain what this means? Because to a lay person, they don't know what the EED defense is. They're not familiar with this. Yes, there's jury instructions, but you're going to hear from someone beyond potentially Mangione. I don't know if we want to call it ironic, but days after his arrest and before Mangione retained her as his lead attorney, Karen Friedman Agnifolo told CNN that a psychiatric defense could be the right move for him.

10:07Quote, you have someone who was a valedictorian of his class. He was brilliant his whole life. He comes from this great family. I mean, something changed, right? Significantly something changed. But people can be ill, for lack of a better term, and I'm not using that as a legal term. People can be ill and disturbed emotionally or mentally, but not necessarily have this extreme emotional distress. You can be a brilliant person. I mean, think about historically some serial killers. I'm not saying Mangione is a serial killer, people who had incredible intellect. You've had people come from broken families.

10:40You've had people come from solid, healthy families. That would not preclude him from having this extreme emotional distress. I think what precludes the success of this defense, as I know it, and we'll learn more, right, because we don't know it, it's under seal still, is you have the writings, you have the preparation, you have the planning, you have the following, you have so many steps that he took and did it well, as scary as that sounds. And it's not the situation where I'm coming home and finding my spouse sleeping with my next door neighbor and I just lose it right then and there. This is just not what you think of when you think of this defense, but it is what it is.

11:16What else are you going to argue? Do you think there's going to be a subtle jury nullification argument? I mean, no one expected that with what appears to be a cold-blooded murder, that he would be made into this kind a folk hero by so many people. To my point before, this defense allows you within reason, not fully, to put the health care system on trial. It allows you to bring out the agony and the pain and the emotional responses that people have been dealing with with the health care system in a small scope, because that is what they're going to argue, I believe, again, I haven't seen it is part of the illness that he was so emotional, distraught, and whatever other factors in his life came into play that all this collectively.

12:03So it gives the ability of the defense to bring some of this out, not the whole storyline, but enough that maybe you mitigate or maybe you get that sympathetic juror who says, you know what, you know, he did justice, as sick as that might sound. But all you need is one. All you need is one. Is there any way the federal case goes away after a verdict here? I think not. I've said this before, and I'm not afraid to say it again. I think the federal case is driven by ego and arrogance, meaning this has no place in a federal courtroom, period. This is a state case. This is the Southern District big footing, as we call it, the matinee's office, to try to use their strong arm.

12:42And I won't go beyond politics in that. It happens. Under Morgenthau's days, he would have said, go take a hike. But it happens. It is what it is. I didn't mean that as a shot at brag. I admit that more of there's been battles in the past. But I think that case proceeds likely regardless, because they want the notoriety of it. We all saw that moment, you know, on top of the aircraft carrier when we're declaring the war is over. A little tongue in cheek here, when Mangione came into New York with the mayor behind him, all these armed officers and these escorts, you would think, you know, the UN was in session and they were protecting these folks.

13:17It was just over the top. It was a spectacle, total spectacle. All of it's been unnecessary because what you're forgetting about, and I think this is so important, is yes, we have proof beyond a reasonable doubt and we have to get there and he's innocent until proven guilty. But no matter what the result is, there is a man whose life was taken unnecessarily. There is a family that lost a father, a husband, a son, a brother, whatever it may be, a friend, a colleague. It's lost. It's all lost on all these side stories. Let's just try to let justice be done. Let's let him put the right defense forward, give him every right we all expect and deserve, and let's let the jury decide.

13:53And Mangione's trial is expected to begin on September 8th. Thanks so much, Jeremy. That's criminal defense attorney Jeremy Saland. This is Bloomberg. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

14:30Let's create smarter business. IBM. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria.

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15:37sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. This message is brought to you by Apple Card. Apple Card is designed with your iPhone in mind, making it easy to get started and even easier to use. Apple Card is a no-fee credit card you can apply for right from the Wallet app on your iPhone. Apple Card has no annual fee, no late fees, and no foreign transaction fees. No fees, period. Every credit card should be this easy. Get started in the Wallet app today. Subject to credit approval, variable APRs for Apple Card range from 17.49 % to 27.74 % based on credit worthiness.

16:17Rates as of January 1, 2026. Existing customers can view their variable APR in the Wallet app or at card.apple.com. Apple Card is issued by Goldman Sachs Bank USA, Salt Lake City branch. Terms and more at applecard.com. We're used to judges sitting at the bench and holding others accountable for their bad behavior. But recently, there have been several high-profile incidents of alleged bad behavior by judges off the bench. In fact, in two cases, the judges were charged, one with misdemeanor drunken driving and another with misdemeanor battery and malicious injury to property. Joining me is Jacqueline Thompson, Bloomberg Law Reporter, who's been following these cases.

17:01So Jacqueline, in the past, we rarely heard about cases of judges misbehaving off the bench. But recently, there have been three cases of alleged misconduct by judges. Tell us about them. Right. So in these three instances, some of them are getting a little more attention than others. There was recently a lot of news about Judge Eleanor Ross in Atlanta, who was subject to a private reprimand by the 11th Circuit for various acts of misconduct, including having an extramarital affair in her chambers in earshot of her law clerks. And she also was found to attend a partisan political event, which was Fulton County District Attorney Fannie Willis' election night party in 2024, 2023.

17:48And that, you know, got a lot of attention for a number of reasons. I mean, it's pretty salacious to say judge having sex in the workplace, as well as the political element of it. The other couple of examples we're looking at is Judge Ryan Nelson on the Ninth Circuit. He is facing some misdemeanor charges stemming from a parking lot altercation that he had. Evidently, another person made some comments about the judge's parking skills, and he did not take kindly to it, according to a video obtained and published by the Idaho State Journal. And he is due actually back in court tomorrow, June 18th, for a pre-trial conference in that case.

18:28And we will have a Bloomberg Law Reporter there to keep everyone updated on exactly what's going on there. And, you know, it sounds like there is a misconduct inquiry started into him by the Ninth Circuit. The chief judge, Mary McGeeha, said that she has identified a complaint against Judge Nelson. We may not know exactly what happens next there, but, you know, we at least know it has gotten the attention of the Ninth Circuit. And the last example is Judge Thomas Ludington. He is a federal district judge for the Eastern District of Michigan. He was charged with a drunken driving misdemeanor, pleaded no contest to that, but is due to end up back in court later this month after a probation officer alleged that he did not comply with the terms of his probation, which was his sentence for the underlying misdemeanor.

19:15You know, Judge Lennington is facing a misconduct complaint, but we do not know if the circuit that oversees him, which is the U.S. Court of Appeals for the Sixth Circuit, has started any misconduct proceedings or an investigation into his behavior. So just explain what happens, how these misconduct allegations, complaints are handled in the judiciary. Yeah, so typically these are proceedings that are handled by the chief judge of a circuit, someone can make a complaint or the chief judge can become independently aware of something that took place involving a judge within that circuit and then start an investigation or an inquiry based off of that.

19:58The chief judge can either take initial steps on their own. They can pull the subject judge to the side and say, hey, did this happen? What's going on here? And sometimes that's just enough and they can conclude a proceeding on that basis alone if they feel like, hey, we've come to a good solution here, or I found no wrongdoing based off of my limited inquiry is the term they use. Other times they say, okay, it looks like there's a little bit more that we need to dig into here. And that's what happened with Judge Ross. Chief Judge William Pryor of the 11th Circuit ordered the creation of a special committee that then started investigating her behavior.

20:35They retained counsel to dig into what exactly was happening there to conduct an investigation and interview her law clerks. So there can be much more of a proceeding there. But we didn't find out about it until a more national committee within the federal judiciary released its opinion affirming that Judge Ross should be subject to a private reprimand for her actions. And then we only knew it was Judge Ross after reporting identified her as the subject judge. So there has been criticism. Let's talk about Judge Ross, because a private reprimand, which her name wouldn't even have been disclosed if Bloomberg Law hadn't found it or another reporter hadn't found that out.

21:20And also she was supposed to write apology letters to her clerks, but the first apology letter wasn't even strong enough. And then she had to write a second apology letter. I mean, that doesn't seem like a penalty at all, a private reprimand. You know, that's the feedback that we've gotten from some experts in the space. And then also we're hearing from some members of Congress, their sort of displeasure with this being the penalty for Judge Ross saying they're going to start taking matters into their own hands, whether or not they have the political willpower or interest to do so is another question.

21:54But yeah, you know, a private reprimand, that would have meant that no one knew who the judge was. No one would have known if there were any potential conflicts of interest in their cases, as, you know, the affair that she had was with a commander in the Atlanta Police Department, which could lead to issues in various cases. So we have a situation where Judge Ross could have gone without being identified this entire time. It was only until what you referenced with the apology letters took place that there was any acknowledgement that Judge Ross was the subject judge, as Chief Judge Pryor made his letters public.

22:33And then there was an acknowledgement also in a recusal order that she issued the other day where she said, I will not hear this case by the Justice Department seeking Georgia voter rolls as the undersigned is what she referred to herself as was the subject of this misconduct complaint. And I was found to do X, Y, Z. And with these kinds of incidents, the public may question the judge's ability to make good judgment calls. And beyond the individual judge, it taints the judiciary as well. Right. Yeah. When I was speaking to former judges, a lot of them said, look, when I'm and they've said this to me over the years, they've said, you know, when I'm not in court, I really feel like I have to hold myself to a pretty high standard in terms of my public behavior, who I'm associating with, what I'm doing when I'm out in public.

23:26Like, I just don't want anything to come back that could undermine my reputation as well as the integrity of the courts. And that's something that I think a lot of judges think about on a daily basis. And it's in the canons and the code of ethics for federal judges. That's something that they have to do. They cannot participate in conduct that undermines the integrity of the courts. So, you know, when you have instances like this, it does start to raise questions about these judges. And whether this is an isolated incident from them, whether it's part of a trend of conduct, if they act like this behind closed doors with court staff, things along those lines.

24:06So it starts to raise bigger questions about the courts. And especially in this period of time where we have judges truly under attack, we've seen a spike in threats against them. We've seen the president and his allies go after judges for rulings that they don't agree with. We see articles of impeachment filed over rulings and not over conduct. It's a period of time where I think the courts would say, hey, please, it'd be nice to not get negative attention right now. And yet we're having these high profile instances that are casting sort of a negative shadow over the courts. It's hard to say what the judge's reactions are, but it does seem like you had the instance where Judge Ross didn't even write an apology letter that was strong enough.

24:53And then you have Judge Ludington, who pleaded no contest to a misdemeanor drunken driving charge. And then a probation officer reports that he failed to do a drug screen that was required during his first week of probation. Now, if someone came before him and had failed to comply with the terms of probation, they might have their probation revoked and be thrown into jail. It just seems like they're not taking this seriously, maybe because they're confident that at most they'll get a slap on the wrist. And that's something that some people have brought up to me as well, is the fact that these judges have so much power and they really can determine, you know, the liberty of so many human beings.

25:39We think of criminal revocation hearings, for example. If someone is out on probation, violates the terms of their probation, they end up back before a judge. And sometimes the penalty for that is, hey, you're going to prison at the end of this hearing. You're being taken into custody by the marshals or you are given a surrender date and that's how this is going to go. So, you know, there are questions about our judges being held to the same standards that the litigants before them are being held to by those own judges. And there is video of Judge Nelson in that parking lot confrontation? Yes, you can find it again for our journalism colleagues over at the Idaho State Journal.

26:22And it shows the judge parking in a way that does take up a bit of three different spots. And, you know, a guy says something to the effect of learn how to park. And it seems to have just set the judge off in some sort of way or another, you know, and it does raise interesting questions. It's not like he yelled, hey, I'm a federal judge. Don't talk to me that way. He just yelled other things and took the guy's glasses off, threw them on the ground, stomped on them. And now he's facing a misdemeanor charge of destroying property. And have the courts taken any action against Judge Ludington? I mean, he did plead no contest to drunken driving and then allegedly violated the terms of his probation.

Read the full transcript

27:12We have no indication of what's going on with the Michigan judge, Thomas Ludington. For Judge Ross, everything is fully wrapped up on the 11th Circuit. Unless there is another complaint over an unrelated instance of misconduct or a different allegation of misconduct that wasn't previously considered, you know, the court's role is sort of done there in terms of any finding or penalty that could be issued against her. But, you know, there have been two members of Congress, two House Republicans from Georgia, which is where Judge Ross is located, who have announced, you know, articles of impeachment against her.

27:53So there's a possibility that the Republican-controlled House could take up those and, you know, start considering whether or not this meets the bar of impeachment, which is high crimes and misdemeanors, and then, you know, move to impeacher. And then if the Senate also has the appetite for taking up a trial is another question. The rules are the rules made by the judiciary, right? So it would take the judiciary to decide to strengthen their rules. It could take the judiciary and it also could take Congress. The judiciary operates under the Judicial Conduct and Disability Act, which is a federal law.

28:29So Congress could go ahead and amend that law requiring certain steps to be taken. But, you know, as long as the judiciary operates within the confines of that law, I think there are opportunities for the courts to implement and adopt reforms on its own without Congress getting involved. We'll talk again if there are any other developments in these cases. Thanks so much, Jacqueline. That's Bloomberg Law Reporter Jacqueline Thompson. With LPL Financial, we provide the services to help push you forward. When it comes to your finances, your business, your future, the only question should be, what if you could?

29:05Payt advertisement, Anna Kendrick, is not a client of LPL Financial LLC and receives compensation to promote LPL. Investing involves risk, including potential loss of principal LPL Financial LLC member FINRA, SIPC. Support for the show comes from Public. Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti.

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30:08public.com slash disclosures. Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen.

30:43Activist investors will be looking for other ways to get into court after the Supreme Court closed off a major avenue to sue closed-end funds. In a 6-3 decision last week, the court ruled that private parties can't sue to enforce most provisions of an 86-year-old federal statute the 1940 Investment Company Act. The justices said that power belongs exclusively to the Securities and Exchange Commission. The ruling reversed a federal appeals court decision that had said the law contained a so-called private right of action allowing investors to sue to rescind contracts made by a fund. Joining me is securities law expert James Park, a professor at UCLA Law School.

31:31Jim, before we get to the implications of the decision, explain what the Supreme Court decided in this case. The Supreme Court decided that the Investment Company Act does not provide an implied cause of action for rescission. There are a couple places where it expressly allows individual plaintiffs to sue, private plaintiffs. If you think that the mutual fund is charging you excessive fees, you can sue for that. If you think that they are profiting through various short-swing profits, you can sue for that. But you cannot sue generally for the remedy of rescission or anything else. Basically, the plaintiff's lawsuit was dismissed because the statute does not authorize the plaintiff to bring a cause of action for rescission.

32:20Why was this a six to three ruling down ideological lines? You know, the decision is based upon the statute and statutory interpretation. And so the majority, consisting of the more conservative justices, refuse to look at the legislative history, which is consistent with their approach more generally. And so if you had looked at the legislative history, there is some evidence that Congress intended to create a private right of action. But it's not in the text of the statute. And the three justices in the minority looked at the legislative history. They did not look just at the text and they are the more liberal justices.

33:03And so this, in some ways, was not just a case about whether or not we think it's a good idea for private plaintiffs to sue, although it partly was about that. It's about what did Congress intent through the legislative history, you know, through the statute and whether you look at legislative history or not. And one group says yes, one group says no. And that, I think, is what determined to some extent the breakup of the of the votes. Now, certainly the justices in the majority are probably also sympathetic to the idea that we should very rarely ever create implied causes of action. We should only look at the text of the statute.

33:42So that's why we get a 6-3 breakdown in this way. Who loses here? Is it activist investors that are losing here? Primarily so, because they are the ones who have been bringing these types of lawsuits. It's not really the type of lawsuit that is brought frequently by your ordinary retail investor. These are activist investors who are paying attention to the governance of these closed-end funds. And they, you know, are basically challenging the governance and the corporate governance practices of these funds. and that is basically the plaintiffs who are sort of being barred now for bringing these lawsuits.

34:21I don't think that retail investors have typically brought these cases, although they could. They could at some point do so. And Saba Capital, which is the plaintiff in this particular case, has brought a number of these against a number of different mutual funds. So they in particular are affected by this decision. Boaz Weinstein, the Saba hedge fund was on, as you say, the losing end of this ruling, said that legal fights against entrenched fund managers will continue. Saba will pursue every avenue available to defend shareholders' rights, including lawsuits under other provisions of the 40 Act and under state law.

34:56So what kind of fights are we likely to see in the future now that this avenue has been closed? Tricky. I'm not really sure there is a clear avenue to bring private rights of action under either federal or state law. If you try to repackage the claim, you know, I'm not sure what federal action there is. There could be some theories you could assert. Under state law, you can always bring a derivative lawsuit saying that the corporate governance decisions violate the fiduciary duties of the directors. But those often face significant procedural hurdles, you know, demand requirement and, you know, sometimes the business judgment role.

35:35So I'm not really sure how viable those causes of action are. And, you know, it's telling that they did rely upon this particular provision, right? This is the provision that they were bringing suit under, and that was their best option. I don't know if there's an obvious second or third choice for private plaintiffs to utilize in this situation. The ball's in the SEC's court, but is the SEC likely to do anything? Not this SEC. I don't think that this SEC is really inclined to expend resources to support activist hedge fund investors, but you never know, right? I never want to prejudge what the SEC is going to do in terms of its enforcement.

36:15I'm sure they'll take a look at it and I'm sure they'll discuss it, but I think it is fairly unlikely that they're going to bring a lawsuit. You know, in a few years, though, maybe there's a different SEC. So if that's the case, then certainly they could bring various enforcement cases, and they may be the right actor to act in most of these situations. Although it just strikes me as a little bit odd that you have what seems to be a state provision that is inconsistent with federal law, and nobody's challenging it, right? That just seems sort of odd to me because, you know, the Maryland law allows the board to take away voting rights of certain large shareholders.

36:56And, you know, that's inconsistent with the Investment Company Act, which says that you have to have equal voting rights for the shares. And so I think that's, you know, something somebody should be able to act upon. And it's odd for the SEC to just kind of leave that hanging and not intervene at all. Are you saying that the Supreme Court decision was an incorrect decision in your view? I don't think it was necessarily incorrect, because their job was simply to interpret the law. And that's what they say the statute means. And so what their decision means is that the private plaintiffs cannot bring a lawsuit for rescission, but the SEC can bring an action saying that there's a violation of the Investment Company Act and they can sue for rescission or some other remedy.

37:38So would you explain the broader struggle in the closed-end fund industry between established boards and activist investors? There's always been some concerned about the governance of mutual funds and particularly closed-end funds. Mutual funds have boards and there's always questions of how independent are those boards from the fund managers who are making decisions. And one view is that they're not very independent because they're handpicked by managers and so forth. And so maybe there's a reason to be concerned and that we can increase the value of the closed-end fund by allowing for this sort of activism.

38:21I think the other view is that, well, you know, mutual funds, you should give a lot of deference to the managers because they are the experts, they're the ones choosing the investment. So there's no really good way to evaluate. And I think they would say the activists are second guessing the fund managers and these boards. That's essentially the main argument that they're going to be making is that, look, there's a lot of discretion you have as a manager to choose what's a good investment. And the board is typically going to defer to that in most cases. And you're just coming in and you're making these Monday morning quarterback calls to basically enrich yourself and say you're doing something and you're really just messing things up.

39:04I think that's what the opponents of activism would say. And there are good arguments on both sides. Jim, does the retail investor lose if the activist shareholders, you know, can't sue like this? Or are the activist shareholders just, you know, suing for the interests of huge hedge funds or whatever? They're definitely mainly in it for their own interests, of course. They have a financial interest because they have significant stakes in these funds. But the retail investors can come along for the ride. You know, I think if they are improving the firm's value, that benefits the retail investors who are not putting any work at all into it.

39:44And so I think that's the argument. The activist investors acting through their self-interest are actually helping these retail investors. Any other possible avenues that we haven't discussed? There is another possibility beyond SEC action and maybe state law derivative suits. and that's for Congress to amend the statute to make it clear that in some circumstances, private plaintiffs can bring a certain type of lawsuit. And it may not necessarily be for rescission, which is kind of a harsh remedy. Rescission means you get your money back, which means the mutual fund would have to liquidate some of its investments, perhaps, and give the money back.

40:25That's not always appealing. But if there could be an action for, say, a declaratory relief or an injunction that essentially says you get your voting rights back, then that strikes me as something that could be a more reasonable type of remedy. And to the extent that that's not allowed under the Supreme Court's decision, Congress, when it's so inclined to do something, could potentially amend the statute to make it clear that some sort of private right of action is appropriate. That's the other course that we might see in a few years. Thanks so much for joining me today, Jim. That's Professor James Park of UCLA Law School.

41:04And 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.bloomberg.com slash podcast slash law. And remember to tune into the Bloomberg Law Show every weeknight at 10 p.m. Wall Street time. I'm June Grosso, and you're listening to Bloomberg.

41:32The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia-Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok Bank. Learn more at BloombergLive.com slash SBS dash Singapore.

From the publisher

Criminal defense attorney Jeremy Saland, a former Manhattan prosecutor, discusses Luigi Mangione asserting a psychiatric defense at his New York murder trial. Then Jacqueline Thomsen, Bloomberg Law reporter, discusses recent incidents of misconduct by judges raising questions about the policing of judicial misconduct. And securities law expert James Park, a professor at UCLA Law School, discusses the implications of the Supreme Court closing off a major avenue for shareholders to sue closed-end funds. June Grasso hosts.

See omnystudio.com/listener for privacy information.

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