SCOTUS Allows Cuts of Millions in Research Grants

0:00Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Wasabi is purpose-built to free your business from skyrocketing storage costs and fees from the big guys.

0:37Wasabi is the go-to provider for professional and collegiate sports teams around the world. Check out Wasabi's AI-enabled intelligent media storage, Wasabi Air, and the industry's only cloud storage service with triple protection against cyber criminals. Wasabi, driving innovation in data storage for up to 80 % less than market competition. Try for free at Wasabi.com. Wasabi Hot Cloud Storage, proud partner of iHeart Podcast Network. Every sale comes down to that single second between buy now and maybe later. PayPal is built to help your business win that moment across new markets and a new agentic era.

1:13With a checkout that's reliable and a global network of hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. We're built for payments, built for growth, built for Agentec. PayPal Open, built for all business. Get started at PayPalOpen.com. This is Bloomberg Law with June Grosso from Bloomberg Radio. I ordered the end to all of the lawless diversity, equity, and inclusion nonsense policies across the government and all across the private sector and the military. President Donald Trump has tried to wipe out diversity, equity and inclusion programs in the public and private sectors.

2:01And early this year, the National Institutes of Health began terminating thousands of medical research grants that don't align with the president's policies. policies. More than a dozen states, researchers, and research organizations filed a suit against the administration, saying the cuts would set back crucial research by years, if not decades. They won at the district court level and at the appellate level. But the Supreme Court, in a 5-4 decision, sided with the Trump administration, clearing the way for it to cut nearly$800 million in grants, while legal battles over the funding play out in the lower courts.

2:41Joining me is constitutional law professor David Super of Georgetown Law. David, what kinds of grants were cut here? The administration canceled thousands of grants the NIH had provided for research on a wide range of topics. Ostensibly, these grants were cut off because they related to diversity, equity, and inclusion or because they related to gender or gender identity as understood by the administration. In fact, it took little more than having the word diversity or equity in the name of the project to get it cut off. Some projects that had nothing to do with race or racial equity or racial inclusion were cut off, but the district court found that disproportionately research into health problems that affect people of color were targets of this cutoff.

3:48Federal Judge William Young, a Reagan appointee, said following a bench trial, this represents racial discrimination and discrimination against America's LGBTQ community. I would be blind not to call it out. Yes. He also found that the cutoffs showed remarkable insensitivity to the health problems affecting women. In the past, have administrations cut off grants for, you know, arbitrary reasons or because they don't comply with the administration's objectives? This is almost unheard of. Sure, if someone is taking a grant and they're not doing the work, they get cut off. But the notion that we wouldn't have given this grant, so we're simply going to cut it off, is extraordinarily wasteful and administrations, both parties in the past, have refrained from doing it.

4:42Explain the Supreme Court's ruling, which was five to four. The question came to the Supreme Court whether to stay, whether to suspend the order that the district court judge had issued. And the district court judge did two things. He struck down the policy guidance the administration based its terminations on, and it struck down the terminations itself. Four justices, the three liberals and the chief justice, voted to deny any interference with the district court's order to let the court order take effect. Four justices voted to stay the entirety of the court order, and the deciding vote was cast by Justice Barrett, who said that she wanted to stay the resumption of funding, but would not interfere with the finding that the policy guidance was illegal.

5:45And what was the reasoning of the majority in allowing the government to withhold the grant money? Their reasoning was that anyone who'd had their grant cutoff should have gone to the Court of Federal Claims, not Federal District Court. And that's the place that it is proper to pursue debts from the federal government. Can you explain what the difference is between, you know, that part of the decision and the part of the decision that allowed the policy to go forward? Yes. Justice Barrett held that the federal courts, federal district courts are completely proper places to challenge the legality of guidance that is issued by the administration.

6:33So if the challenge is that this guidance is without solid legal basis, that it's contrary to the federal government's legal obligations, that it violates civil rights laws, those are proper claims to bring in federal district court and to get an injunction, she said. But she said that if you actually want money, that has to come from the court of federal claims. So that means that the challengers here would have to go to two separate courts and bring two separate actions? Yes. She said there's precedent for that. And she asserted that that was the result of Congress's passing the jurisdictional statutes they have and the Supreme Court's prior interpretations.

7:18And do you think that's a correct interpretation? No, I don't. The Court of Federal Claims is there to handle a lot of routine matters where there's a question about the quality of the paint job that was done on a federal office building and the federal government's refusing to pay and the painting contractor wants to be paid. There's a need for that. That's useful sort of thing. But that's very different from a systematic violation of thousands of contracts asserting a power that has never previously been recognized. Those are the kinds of statutory and constitutional issues that have long been the province of the general federal court system, the district courts and the circuit courts of appeal.

8:08So can the groups here, now that they have this judgment from the Supreme Court about the policies, can they now go to the Court of Federal Claims and ask for the money? If only it were that simple. This was not a decision on the merits of those policies. It was simply about how the litigation should proceed. And Justice Barrett, joining with the Chief Justice and the three liberals, held that the litigation can continue in the First Circuit Court of Appeals about whether or not those policy documents are legal. And if they are struck down again in that court, the Trump administration could appeal back to the Supreme Court on the merits.

8:59She indicated that there were some open questions in her mind that would need to be resolved before a final decision could be made about the legitimacy of those policy documents. So she was only keeping the litigation alive. She wasn't resolving it in the favor of the challengers. And the majority found that the government would be irreparably harmed if it had to pay out this money? How so? Yes, that's a particularly disturbing part of it. They said that because the recipients wouldn't be able to repay the government if it was ultimately found that the money was not owing, that the federal government shouldn't have to pay out the money until after a final judgment is issued, which once appeals are accounted for, could take several years.

9:50This is treating the entire matter as a debt collection issue rather than an issue of democratic governance. It could be that at the end of the day, the parties entitled to money will get some money, but the research will long since have been abandoned. The employees long since have been laid off. Many of the nonprofits will have been bankrupted by the long delay. And this is essentially saying that the federal government is too big to comply rather than too big to fail, too big to comply, because the size of the grants it gives out and the importance of the grants it gives out are such that the recipients don't have the money to pay it back.

10:37In April, the Supreme Court allowed the Trump administration to cancel$65 million in teaching-related grants. And in this case, Justice Neil Gorsuch accused the trial judge of defying the Supreme Court by not following that. When this court issues a decision, it constitutes a precedent that commands respect in lower courts. He also said recent federal judges' rulings on immigration and removal of leaders of independent agencies were also instances of what he said was judicial defiance. But the Supreme Court rulings he's referring to are rulings on the shadow docket, where there isn't full briefing or oral arguments or decisions sometimes.

11:26Well, it's a very curious position they're taking. Most of the history of the Supreme Court has been through formal consideration of cases, oral arguments, briefs, and thorough opinions from the justices. Increasingly, under the first Trump administration, the Biden administration, and now, the Supreme Court is not accepting full briefs, not listening to oral arguments, not writing full opinions, sometimes not writing any opinions at all. And what Justice Gorsuch is saying is even when the Supreme Court is issuing an emergency order, and even when it's not at all clear what the basis for that order is, the lower courts somehow must read the Supreme Court's mind.

12:13If the Supreme Court wants lower courts to follow it, it needs to tell them what it's doing. Chief Justice Roberts joined the liberals in the case involving the teaching-related grants and in this case. Is that surprising in any respect? No. Chief Justice Roberts has been very concerned about business climate and allowing businesses to function freely. And the federal government that isn't bound to comply with its contract is very bad for business. If I were a private business person, I would be doing anything I could to avoid having a contract with the federal government because the effect of these decisions is that the contract isn't worth anything.

12:55So as we've discussed before, the Trump administration has prevailed in a majority of its about 20 emergency applications to the Supreme Court. Often you have the liberal justices dissenting. And in this case, Justice Ketanji Brown Jackson wrote a solo blistering dissent where she repeated what she said before about the Supreme Court favoring the Trump administration. And she referred to the comic strip Calvin and Hobbes, which features a game of Calvin Ball. And she wrote, quote, Calvin Ball has only one rule. There are no fixed rules. We seem to have two. That one and this administration always wins.

13:42So no fixed rules and the administration always wins. You can really sense the frustration in some of these dissents by the liberal justices. and Justice Jackson seems to be getting more sort of brazen in her dissents. Well, she has, and it's not hard to understand why. Throughout the country's history, contract has been a central part of its law, and the notion that the government, above all, complies with its contracts has been central. We have a new administration that doesn't want to. And rather than bringing it to heel, this court is bending over backwards to accommodate it. That certainly does look like favoritism.

14:26Is there any other avenue that the organizations and the states here can pursue if it would take too long to go to the court of claims? Or is this sort of the end of the grants? They can go to the court of federal claims. There are significant obstacles to getting relief from that court. It's a real court. People do win real judgments there. I don't mean to disparage it in that way, but it's going to be a very difficult way to proceed. Lots of money that is owed probably will never be ordered to be paid out of that court. And the result of all of this is likely to be that many of these programs are indeed disbanded.

15:11What stands out to you in this decision? This isn't really a liberal conservative thing. This is just a rule of law thing. And if the government doesn't have to keep its contracts, no one should do business with it. Always a pleasure, David. Thanks so much. That's Professor David Super of Georgetown Law. The Federal Trade Commission is suing the... Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment.

15:46It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

16:08Every sale comes down to a single second. The one between buy now and maybe later. PayPal is built to help your business win that moment. With a checkout experience that feels certain, reliable, and familiar. with a global two-sided network and hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. New markets, new AI-powered selling services. A whole new agentic era where you decide how your business will show up and stand out. PayPal is built to help your business come out ahead. We're built for payments, built for growth, built for agentic.

16:53PayPal Open. Built for all business. Visit PayPalOpen.com to get started. That's PayPalOpen.com. Innovation is what gets your business to market. And Wasabi is designed to give every business a shot at competition. How? Break free from skyrocketing storage costs and unpredictable egress fees from old and top-heavy legacy providers. You know, the big guys. Wasabi is the world's hottest cloud storage company and the go-to provider for professional and collegiate sports teams and leagues around the world. And here's why. Innovation. From Wasabi's AI-enabled intelligent media storage, Wasabi Air, to the industry's only cloud storage service with triple protection against cyber criminals, data deletion, and ransomware, the world's top companies trust Wasabi.

17:45Remember, Wasabi is up to 80 % less than market competition and doesn't charge a cent for businesses to access their own data. Wasabi, another championship story. Check them out for free at wasabi.com. Wasabi Hot Cloud Storage, proud partner of iHeart Podcast Network. Operators of LA Fitness over allegations that they make it exceedingly difficult for customers to cancel gym memberships and other related services offered in their clubs nationwide. The FTC accuses Fitness International and its subsidiary of illegally charging consumers hundreds of millions of dollars in unwanted recurring fees as a result of the cumbersome cancellation process.

18:32The director of the agency's Bureau of Consumer Protection said in a statement, the FTC's complaint describes a scenario that too many Americans have experienced, a gym membership that seems impossible to cancel. Jill Hill, the president of club operations at Fitness International, said the FTC's allegations were without merit and that the company was confident it would prevail in court. Joining me is Sean Collins, a partner at Stradling. Sean, did this suit surprise you? I'm surprised that the FTC is bringing this lawsuit. And the reason why I say that is, so California back in 2011, 2012, basically was the first state to kind of recognize that, you know what?

19:18If you automatically start charging somebody's credit card every month, you should probably make it easy for them to cancel as opposed to putting up a bunch of impediments to them being able to cancel, i.e. call somebody and then wait on the phone for 30 minutes until you get a hold of a customer service representative or fill out 10 pieces of paperwork because what the data suggests is that when a person has to stay on the phone for 30 minutes to cancel their membership or fill out 10 pieces of paper they just say forget it i don't have time to do that i gotta go pick up my kids i gotta get to work and then they end up being charged hundreds and hundreds of more dollars unknowingly just because it was so difficult for them to cancel.

19:58So California back in 2011 amended their auto renew statute to say, if a person signs up online, you have to offer them the same mechanism for cancellation that they signed up for. Now, why was that important? That means that if I click the button on my iPhone, if I click the button on my computer to sign up, then I need to be able to to click a button on my iPhone, to click a button on my computer to cancel just as easily as I signed up. Now, the reason why I'm saying that is I was really shocked that the FTC brought this lawsuit because the federal law, so Section 5 of the FTC Act and ROSCA, do not really have that same exacting level of specificity that California, New York, Florida, Oregon, D.C.

20:46even has a similar mechanism now, and there's other states, Oregon as well, whereby you have to offer the consumer the same ease of cancellation that it was for them to sign up. And so that's probably one of the reasons why, I think it's one of the reasons why the LA Fitness is fighting it, amongst other reasons. But if you read the complaint, the complaint is kind of weird, because they're saying, well, you made it really difficult for them to cancel. But then when you read the statutes that they're seeking relief under, they're basically saying Section 5 of the FTC Act and then count two is ROSCA and then count three, they're saying you failed to provide simple cancellation mechanism.

21:29Federal law is not really specific on what simple cancellation mechanism means. So like I say, in California, we say simple cancellation mechanism means that if I click the button to sign up, I should be able to click a button to cancel. There is no same standard, at least, that's been articulated under federal law. So I suspect that what LA Fitness is doing is saying, well, we didn't violate federal law by requiring people to come in and cancel. Because the other thing about gym memberships is most people sign up for their gym membership by walking into the gym and filling a piece of paper out.

22:03You don't do it on your iPhone. Not most people. Now, a lot of people may be doing that nowadays, but for LA Fitness, if I'm signing up for a gym membership, I usually have to walk into the gym, look at the gym, see if I like the gym, and then sit down with somebody to sign up. Now, I haven't seen the actual agreement for the sign up, but there may be disclosures in that agreement that say, if you want to cancel your membership, these are the things that you need to do. So then do you think this lawsuit came as a surprise to LA Fitness? These lawsuits just don't happen overnight. The FTC didn't blind side LA Fitness and you know LA Fitness woke up one morning they were being sued.

22:41Typically what happens is probably two years ago the FTC was probably getting a lot of complaints via the Better Business Bureau about people complaining about having a hard time canceling their LA Fitness memberships and then they opened up an investigation. So they sent a CID which is a federal civil investigative demand to LA Fitness saying hey everybody's complaining about having a a hard time canceling your membership. What do you have to say about this? And send us a bunch of documents so we can evaluate whether or not these are valid claims. Over the course of two years, they probably did this investigation.

23:14And then their findings were, yeah, you guys are making it really difficult for people to cancel their memberships. And we want you to pay them back. LA Fitness probably said, well, no, we're not going to pay them back because we didn't do anything wrong. We didn't violate the law. So they effectively challenged the FTC's findings, at which point if you challenge the FTC's findings, the FTC reserves the right to file a lawsuit against you. Which they certainly did here. Tell us what the suit alleges. So their core complaint is they're saying that LA Fitness is intentionally making it hard for people to cancel their memberships to basically have the ability to continue charging them every month.

23:50And if you look at ROSCA, the third element of a ROSCA claim is you have to give somebody a simple mechanism of cancellation. The problem is, is there's never been any clear-cut definition of what simple mechanism of cancellation means. So LA Fitness can say, well, a simple mechanism of cancellation is exactly what I put in their contract. You have to walk into the LA Fitness gym where you're a member and tell people you want to cancel. And ROSCA is the Restore Online Shoppers Confidence Act, which was enacted almost 15 years ago. So the complaint is specifically targeting this cancellation policy.

24:27You have to go to the gym's website and print out a form and either mail the form using registered or certified mail or submitted in person to a specific manager with authorization to process it. And sometimes it's hard to find that manager. So it seems like it's more than just coming in person to cancel. Correct. So that's certainly the allegation. But here's the FTC's challenge. So that could be four or five people that had that issue. But if that's not a universal thing, if that's just a problem that four or five people in Southern California had at their particular gym, you're going to have a hard time proving that that was an institutional policy across all of the United States.

25:12And one of the things LA Fitness comes back with is that the FTC is relying on Roscoe, and that was designed to address only online retail transactions. Is that a good defense? It is a good defense because, to your point, yeah, the Restore Online Shoppers Confidence Act is exactly that. It is a statute that was passed to protect online shoppers, people who are shopping. It's really an e-commerce statute. Now, like I say, the reality of the situation with gyms is even in this day and age, the majority of people sign up for their gym membership in person. so yes there may be a certain subset of people who signed up for their gym membership online and i don't know what la fitness i don't know how their their gym membership works i'm not a member at one of their gyms but i suspect that they have two paths for joining the mid joining the gym you can either sign up online or you could sign up in person if you sign up in person they probably have a different set of requirements for cancellation than they do for the person that signs up online.

26:19So if you sign up online, they probably offer you the ability to cancel your membership online. If you sign up in person, they probably have this requirement that you have to come into the gym and cancel in person. And the reason why that probably exists is if the person signs up in person, they probably never created login credentials. So the only way they would be able to cancel is if they walked into the gym to cancel. Whereas the person who signed up online probably had to create a user ID and a password to create their account. And so they now have the ability to log in online and cancel.

26:53So that's why, at least based on my initial read of this lawsuit, I don't know that Roscoe would fit for the business model of LA Fitness. So that's going to be a challenge for the FTC. Coming up next on the Bloomberg Law Show, I'll continue this conversation with Sean Collins, a partner at Stradling. This is actually the second suit brought by the Trump administration focused on overly onerous cancellation policies. The last suit was against Uber. I'm June Grosso, and you're listening to Bloomberg. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal.

27:33Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

28:02Every sale comes down to a single second. The one between buy now and maybe later. PayPal is built to help your business win that moment. with a checkout experience that feels certain, reliable, and familiar. With a global two-sided network and hundreds of millions of buyers who already know us. All to keep you in control however buying happens next. New markets, new AI-powered selling services. A whole new agentic era where you decide how your business will show up and stand up. PayPal is built to help your business come out ahead. We're built for payments, built for growth, built for Agendic.

28:46PayPal Open, built for all business. Visit PayPalOpen.com to get started. That's PayPalOpen.com. Innovation is what gets your business to market. And Wasabi is designed to give every business a shot at competition. How? Break free from skyrocketing storage costs and unpredictable egress fees from old and top-heavy legacy providers. You know, the big guys. Wasabi is the world's hottest cloud storage company and the go-to provider for professional and collegiate sports teams and leagues around the world. And here's why. Innovation. From Wasabi's AI-enabled intelligent media storage, Wasabi Air, to the industry's only cloud storage service with triple protection against cyber criminals, data deletion, and ransomware, the world's top companies trust Wasabi.