This is [music] Bloomberg Law with June

Graasso from Bloomberg Radio.

>> It's less than 3 months until the start

of Luigi Manion's New York State murder

trial and his defense has finally been

revealed. Manion plans to assert a

psychiatric defense, claiming he was

suffering from extreme emotional

disturbance when he gunned down United

Healthcare 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 Manion of the killing, but it

could free him from prison sooner. My

guest is criminal defense attorney

Jeremy Sand, a former Manhattan

prosecutor. Jeremy, is it not surprising

that Manion is going to assert a

psychiatric defense in a case where the

evidence seemingly against him is

overwhelming?

To a certain extent, anyone who has

knowledge of the law and 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. It's I did it

with a butt and an asterk 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 prepoundonderance 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. If 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 and a

jury would decide to make the

determination whether this 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.

Do 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 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. I

don't like the 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, but I still don't see it as a

winner. I see it as a attempt to to run

away from what is a 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 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 asterk 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, on

the man one and the manslaughter, it's a

B violent felony. It's a mandatory

minimum of 5 years and a maximum of 25

years. So realistically, is a judge

going to give him if he's convicted 5

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 the scope and magnitude

of all the steps that Manon allegedly

took that ultimately culminated in this

homicide and this in this death. So, 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. believe based on my, you

know, training experience that the

prosecution was going to challenge this

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, two jurors on there

who might be swayed by this outside

noise about the health care system. Was

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. Uh it's not again that

traditional uh insanity defense. Not to

sound glib here. It's not one flew over

the cuckoo's nest, you know, it's not

nurse ratchet, 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, a

different animal, but 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, a medical health

professional? So, there's going to 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?

Well, how else are you going to

establish that he had these mental

health issues that were so overwhelming

and he had such great duress uh and

distress and disturbance? You're going

to need professionals and experts to

help elaborate on this. Absolutely. And

someone's going to 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 Manion. I don't know if we

want to call it ironic, but days after

his arrest and before Manion retained

her as his lead attorney, Karen

Freriedman told CNN that a psychiatric

defense could be the right move for him.

Quote, you have someone who was a

validictorian 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 man Joan is a serial killer.

People who had incredible intellect.

You've had people come from broken

families. You'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 uh 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. What 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 of 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 and whatever other

factors in his life came into play that

all this collectively so 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

Matt and DA's office to try to you know

use their strong arm and I won't go

beyond politics in that it happens you

know under Morganthaw's days he would

have uh said go take a hike but it

happens it is what it is and I didn't

mean that as a as a shot at brag I meant

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

uh you know on top of the aircraft

carrier We're declaring the war is over.

A little tongue and cheek here. When

when Manion came into New York with with

the mayor behind them, all these armed

officers and these escorts, you would

think, you know, the UN was in session

and they were protecting these folks. It

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.

>> And Manion's trial is expected to begin

on September 8th. Thanks so much,

Jeremy. That's criminal defense attorney

Jeremy Sand. This is Bloomberg.

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. So, 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 extrammarital 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 Fonnie

Willis's um election night party in 2024

2023. And 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. And

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

McGee said that she has identified a

complaint against Judge Nelson. Uh we

may not know exactly what happens next

there, but you know, we at least know

it. It has gotten the attention of the

Ninth Circuit. And the last example is

Judge Thomas Letington. 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. You know,

Judge Lennington is facing a misconduct

complaint, but we do not know if the

circuit that oversees him, which is the

US 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. Um 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. The

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. Uh Chief Judge

William Prior of the 11th Circuit

ordered the creation of a special

committee that then started

investigating her behavior. where they

retained counsel to dig into what

exactly was happening there to conduct

an investigation and interview her law

clerk. 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. And 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 um their sort of

displeasure with this being the penalty

for Judge Ross uh 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. But 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. Um, 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 Prior made

his letters public. And 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 roles as the undersigned

is what she referred to herself as was

the subject of this misconduct complaint

and I was found to do XYZ."

>> 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, um, who I'm associating

with, what I'm doing when I'm out in

public. 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 um 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. So, it 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. And then you have and then you

have Judge Lington 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. And we

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

[clears throat] 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 are 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. And 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. So,

>> and have the courts taken any action

against Judge Lington? I mean, he did

plead no contest to drunken driving and

then allegedly violated the terms of his

probation. We have no indication of

what's going on with the Michigan judge

Thomas Letington. Um for Judge Ross,

everything is fully wrapped up on the

11th Circuit. Um 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 um 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. So 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 impeach 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. Um the

judiciary operates under the Judicial

Conduct and Disability Act which is a

federal law. So 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 Jacquellyn Thompson.

Activist 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 six-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 resin

contracts made by a fund. Joining me is

securities law expert James Park, a

professor at UCLA law school. Jim,

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 recision. 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 recision or anything else. Basically,

the plaintiff's lawsuit was dismissed

because the statute does not authorize

the pliff to bring a cause of action for

recision.

>> Why was this a 6 to3 ruling down

ideological lines?

>> You know, the decision is based upon the

uh statute and statutory interpretation.

And so the majority consisting of the

more conservative justices refused 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. And 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 break up of the of the votes.

Now certainly the 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. Um, so 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 the governance of these

closedend 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. I 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 Sabba 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. So 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. So 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.

I'm sure they'll take a look at 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 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

and, 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

recision, but the SEC can bring an

action saying that there's a violation

of the investment company act and they

can sue for recision or some other

remedy.

>> So would you explain the broader

struggle in the closed end fund industry

between established boards and activists

investors? There's always been some

concern about the governance of mutual

funds and particularly closedend funds.

You know, mutual funds have boards and

you know, 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, you know, managers and so

forth. And so maybe there's a reason to

be concerned and that we can increase

the value of the closedend fund by

allowing for this sort of activism. I

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 investments and there's no

really good way to evaluate and I think

they would say the activists are

secondguessing the the fund managers and

these boards. That's essentially the

main argument that they're going to be

making is that look, there's, you know,

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, you know, Monday morning

quarterback calls to basically, you

know, enrich yourself and say you're

doing something and you're really just

messing things up. I think that's what

the opponents of activism would say and,

you know, they're there 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 the firm's value, that

benefits the retail investors who are

not putting any work at all into it. And

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 recision which is

kind of a harsh remedy. Recision 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. um that'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 uh 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. And that's it for this

edition of the Bloomberg Law Show.

Remember, you can always get the latest

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