Our Vichy Moment: Time to Stop Collaborating

 In my experience practicing law for nearly 40 years, I have learned that American institutions--corporations, individuals and non-profit alike--are very pragmatic when it comes to resolving disputes.  Clients may initially claim that they must stand on principle, but in the end will most often swallow principle to put a problem behind them. This is especially the case when the potential downside to an investigation or lawsuit is potentially catastrophic.

I am not surprised, therefore, to see a large number of universities and law firms rush to make a deal with the Trump Administration when faced with the potential of heavy financial penalties.  Law firms have been subject the Executive Orders with potentially devastating sanctions--prohibiting federal agencies from working with the sanctioned law firms, ceasing government contracts of clients that hire them, and suspending the security clearances that many lawyers need to do our jobs (certainly true of my practice).   While a hardly few have chosen to fight--most notably Perkins Coie, Jenner & Block, and Wilmer Hale--a larger number of the largest U.S. law firms have capitulated.  

Universities have been hit with the loss of huge cuts in federal grants (largely to science departments). In response, Universities have caved as well.  Columbia has agreed to Trump's demands (including placing an academic department under supervision) , and it looks like Harvard is on the road to caving as well.  It has changed the leadership of an academic department as well.

While I understand the desire to make a deal.  This needs to stop.  American institutions need to fight.  Michael Roth, the President of Wesleyan University calls this "a Vichy moment in American history . . .You can have preserved your school but you live in a sea of authoritarianism."   As Robert Kuttner elaborates:

In 1940, the French hoped to preserve part of “free France” by making a separate peace with the Nazis and setting up a puppet regime under Marshal Philippe Pétain based in Vichy, while the Germans occupied and ruled northern France. The arrangement lasted only until the Gestapo decided otherwise in 1942 and “free France” fell increasingly under direct Nazi rule.

Preserving a Columbia that is partly free is the same sort of fantasy. The rest of Columbia is free only until Trump decides to escalate his demands and seize more territory.
Wesleyan has the same kinds of federal funding streams at risk as larger universities: research grants from NIH and NSF, as well as Pell grants to students and the federal student loan program. I asked Roth if speaking out puts all of these at risk.

 “Of course, I think about that,” Roth said. “And then I think that’s the classic collaborationist dilemma, right? You know, you collaborate with authoritarians who you know are in the wrong, in order to keep them from doing worse stuff. And I think when you do that, when you engage in the collaboration, you actually encourage them to do even worse stuff.”

I agree with Roth.  The Trump Executive Orders against law firms and the actions against the Universities are unquestionably illegal,  unconstitutional, and dangerous. Every law firm to fight the Executive Orders has won in court--in cases decided by Judges appointed by both Republican Presidents and Democratic Presidents.     Similarly, there is no statutory authority for the actions against the Universities.  While Title VI of the Civil Rights Act allows for sanctions, these can only be imposed after a formal investigation and the remedies must be limited to the programs found to be in violation. Unless the violation involves the Chemistry Department, you can't take away its grants as a sanction. Moreover, it is clear that the Universities are being targeted because of speech--which makes them constitutionally suspect as well.

So what's the harm in collaboration if it protects your institution?  First, it is wrong-headed to think that this one deal will appease the tyrant.  It won't.  To the contrary, the evidence is that it will only embolden Trump to ask for more. Columbia has already learned this lesson.  After agreeing to Trump's terms, it has now learned that Trump is demanding that it be subject to a formal consent degree.  The law firms may soon learn this lesson as well.  They thought they were merely agreeing to do pro bono work for crime victims and other favored causes of the right.  Just last week, however, Trump suggested that the obligation might also include helping both the government with trade negotiations and the coal industry.

The lesson here is simple--caving only leads to more demands. As Michael Roth explains "I think that’s the classic collaborationist dilemma, right? You know, you collaborate with authoritarians who you know are in the wrong, in order to keep them from doing worse stuff. And I think when you do that, when you engage in the collaboration, you actually encourage them to do even worse stuff."

More fundamentally, collaboration normalizes the authoritarian actions.  Simply put, when Columbia and Paul Weiss caved, they made Trump even more eager to go after other universities and law firms.

Fighting is hard.  Fighting is risky.  But the lesson of history is that not fighting authoritarians, in the end, never ends well.

 

We Finally Found the One Thing Trump Can't Bully: The Bond Market

 

For anyone with a 401(k) account, the last week has been a roller coaster.  Stocks plummeted after Trump announced the largest tariff increase in American history, only to have the market see huge gains after the tariffs were paused.  Apparently, the fact that this was just a pause and still applies to our largest trading partner--and thus the Trump tariff chaos will continue--has resulted in yet another sell-off today.

But the stock market is not where you should focus.  By all accounts, it was not the stock market that caused Trump to pull back from his tariffs--it was the bond market.

James Carville famously said "I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a 400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."  

You would expect that when stocks are falling investors would flee to the safer Treasury Bond market.  That is what usually happens when stocks are falling and there are fears of a recession.  But that is not what happened.  Instead, after an initial drop,  the 10 year Treasury  Bond rate
jumped a full quarter point.  As the Guardian reported, "'This is a fire sale of Treasuries,” said Calvin Yeoh, a portfolio manager at the hedge fund Blue Edge Advisors. “I haven’t seen moves or volatility of this size since the chaos of the pandemic in 2020.'"

This means that investors ere less likely to view Treasury bonds as a safe place to put their money.  This should not have been a surprise--fully a third of all Treasury holdings are by foreign institutions--and even a small sale of these bonds can cause a large increase in interest rates.  Gordon Ip (one of my favorite financial columnists) explained this today in the Wall Street Journal:

As of last June, foreigners held $7 trillion of Treasury bonds (half by official investors such as central banks). That is about a third of the total held by the public. The federal budget deficit is running at around $2 trillion a year, or 7% of gross domestic product, and Senate Republicans just passed a budget resolution that would continue outsize deficits for the foreseeable future.

So the U.S. needs foreigners to keep rolling over the bonds they hold, and buying new ones. Even a small pullback would cause yields to jump. Jay Barry, head of global rates strategy at JPMorgan Chase, estimates that yields rise a third of percentage point for each $300 billion decline in foreign official holdings of Treasurys.

So why was this so scary to Trump that he pulled back--at least for 90 days--from the huge tariff increase? The concern is that the sell-off of the Treasurys could become a rout, resulting in huge increases in interest rates--which could have a devastating effect on the U.S. economy.  Already high mortgage rates skyrocket.  Of greater concern is that a sell-off could threaten the U.S. financial system.  Banks use bonds as part of their capital reserves.  As the bond prices drop, their capital reserves do as well.  As we saw in 2008, a large drop in bank capital can cause the financial markets to "freeze"--they stop making loans.

The long and the short of all of this is that Trump finally ran into an institution he cannot bully: the bond market.   

My other posts of the Trump Tariffs:

Are the Trump Tariffs even Legal?

A Few Observations About the Trump Tariffs

 

 

The Gulf of Mexico Returns: District Court Orders that the White House Restore AP Access to the Oval Office

 The Associated Press made an editorial decision to continue to call the Gulf of Mexico by the name it has historically had (and that is used by all Nations save One).  In response the Trump White House Press operation barred the AP from Oval Office events and East Room events to which the press is otherwise invited.  

Seems like a clear cut violation of the First Amendment to me.  The law is clear that while the White House does not need to give the press access to the Oval Office or other places in the White House, but if it does give access it cannot discriminate on the basis of speech.  It has a great deal of power to limit access to White House spaces, but there are limits.  One critical limit is that access to the White House cannot be be limited based on the expression of viewpoints.

Today the U.S. District Court for the District of Columbia agreed.  It ordered the White House to "immediately rescind the denial of the AP’s access to the Oval Office, Air Force One, and other limited spaces based on the AP’s viewpoint when such spaces are made open to other members of the White House press pool" and l immediately rescind their viewpoint-based denial of the AP’s access to events open to all credentialed White House journalists."

The court's opinion is lengthy, and well reasoned.  Here is its summary:

The Government repeatedly characterizes the AP’s request as a demand for “extra special access.” Gov’t Opp’n Br. at 12; see also id. at 10–11, 17. But that is not what the AP is asking for, and it is not what the Court orders. All the AP wants, and all it gets, is a level playing field. See Mot. Preliminary Inj. at 45 (“[T]he AP’s journalists seek access to a forum—opened by the White House—on the same terms as other journalists.” (cleaned up)); see also Hr’g Tr. at 186:1–187:25. In framing things otherwise, the Government fails to fully engage with forum analysis and retaliation caselaw. Rather than grappling with the implication of these doctrines, the Government tries to sidestep them. Defendants may pursue their favored litigation tactics, but the Court must address the merits of the relief requested.

The AP seeks restored eligibility for admission to the press pool and limited-access press events, untainted by an impermissible viewpoint-based exclusion. That is all the Court orders today: For the Government to put the AP on an equal playing field as similarly situated outlets, despite the AP’s use of disfavored terminology. The Court does not order the Government to grant the AP permanent access to the Oval Office, the East Room, or any other media event. It does not bestow special treatment upon the AP. Indeed, the AP is not necessarily entitled to the “first in line every time” permanent press pool access it enjoyed under the WHCA. But it cannot be treated worse than its peer wire services either. The Court merely declares that the AP’s exclusion has been contrary to the First Amendment, and it enjoins the Government from continuing down that unlawful path.

You can read the order and decision here. A victory for the First Amendment.

Ignore the Trump Administration Spin: The Supreme Court Decision Yesterday Was Still a Win for Due Process

 Yesterday in a 5-4 decision, the U.S. Supreme Court overturned the order of the district court in D.C. stopping deportation and transfer of Venezuelans to El Salvador pursuant to the Alien Enemies Act.  The Trump Administration immediately declared this a huge win.   As the Washington Post reports, "Homeland Security Secretary Kristi L. Noem celebrated the Supreme Court’s ruling in a social media post Monday evening. “President Trump was proven RIGHT once again! SCOTUS confirms our Commander-in-Chief Donald J. Trump has the power to stop the invasion of our country by terrorists using war time powers. LEAVE NOW or we will arrest you, lock you up and deport you,” she wrote."

To the contrary, while the Supreme Court decision was disappointing in many respects, it was also a unanimous decision that migrants are entitled to due process before being deported and transferred. 

As a starting point, it is important to note that the Court did not reach the merits of the case.  It did not decide whether the Alien Enemies Act authorized the transfer of migrants to El Salvador.  It did not decide whether the transfer of the migrants to a notorious El Salvadoran prison was lawful.  Instead, the Court merely ruled that the case was brought in the wrong court.  The case was brought in the federal courts in D.C. as a case under the Administrative Procedures Act, but should have been brought as a habeas corpus action in Texas where the migrants were detained. 

What is interesting about the decision is that the Majority expressly rejected the argument that migrants could be removed without notice and an opportunity to contest removal:

“It is well established that the Fifth Amendment entitles aliens to due process of law” in the context of removal proceedings. Reno v. Flores, 507 U. S. 292, 306 (1993). So, the detainees are entitled to notice and opportunity to be heard “appropriate to the nature of the case.” Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 313 (1950). More specifically, in this context, AEA detainees must receive notice after the date of this order that they are subject to removal under the Act. The notice must be afforded within a reasonable time and in such a manner as will allow them to actually seek habeas relief in the proper venue before such removal occurs.

This point is emphasized by Justice Sotomayor in her dissent:

 Critically, even the majority today agrees, and the Federal Government now admits, that individuals subject to removal under the Alien Enemies Act are entitled to adequate notice and judicial review before they can be removed. That should have been the end of the matter.

.  .  .

So too do we all agree with the per curiam’s command that the Fifth Amendment requires the Government to afford plaintiffs “notice after the date of this order that they are subject to removal under the Act, . . . within reasonable time and in such a manner as will allow them to actually seek habeas relief in the proper venue before such removal occurs.” Ante, at 3. That means, of course, that the Government cannot usher any detainees, including plaintiffs, onto planes in a shroud of secrecy, as it did on March 15, 2025. Nor can the Government “immediately resume” removing individuals without notice upon vacatur of the TRO, as it promised the D. C. Circuit it would do. See 2025 WL 914682, *13 (Millett, J., concurring) (referencing oral argument before that court). To the extent the Government removes even one individual without affording him notice and a meaningful opportunity to file and pursue habeas relief, it does so in direct contravention of an edict by the United States Supreme Court. 

Not surprisingly, the ACLU called this an important victory.  They are clearly right.

So what does this mean?  For future attempts to transfer migrants under the Alien Enemies Act, the Trump Administration must afford "a meaningful opportunity to file and pursue habeas relief."  Given the practice of the Administration in sending detainees to Texas (where the district court and Court of Appeals are dominated by conservatives), most of these cases will need to be filed in the Texas federal district courts--which will be much less favorable to migrants than D.C.  Nonetheless, the argument that the Alien Enemies Act does not authorize the removals (as well as the argument than transfer to the El Salvadoran prison is itself a constitutional violation remain) will be litigated and most likely decided by the Supreme Court.

 What of the migrants sent to El Salvador already?  I think they have a good argument that after transfer to El Salvador, the D.C. district court is the right venue for their habeas action.  The district court this morning issued an order stating that "[T]he Supreme Court...determined that the appropriate venue for such proceedings is the Southern District of Texas or wherever Plaintiffs are currently held."   There is case law supporting that D.C. is the appropriate venue for habeas for individuals held outside the United States.  Indeed, I have been involved in two habeas cases brought by detainees at Guantanamo, and these were brought in D.C. Last time I checked, El Salvador is outside the U.S. 

The most challenging issue is what relief the migrants can obtain.  That is the issue before the Supreme Court as I write.

 

 

 

Are the Trump Tariffs Even Legal?

 With all the attention to the harm that the Tariffs will cause the US and Global economies, there has been little discussion on an important question: is Trump even authorized to impose such massive tariffs?  There is actually a strong legal case that the tariffs are not authorized, and there is already one legal challenge to the initial round of tariffs on Canada, Mexico and the U.S.

There is a complicated set of laws governing the President's authority to issue tariffs.  This not an area of my expertise so I won't pretend to summarize these laws.  (But we do have great trade lawyers at Arnold & Porter if you are looking for great legal counsel!).  Suffice it to say that these trade laws allow the President to impose tariffs on certain industries using a list of particular  criteria and only after a process is followed.

Trump, however, did not exercise any of these trade authorities in imposing his tariffs--either in the first round or in this week's  tariffs.  Instead he relied on the International Emergency Economic Powers Act (which all the cool kids call IEEPA) , which I do address in my practice.  IEEPA is the basis of much of our sanctions on other countries.  It allows the President to address unusual and extraordinary threats by declaring a national emergency, and authorizes the President to prohibit or regulate, among other things,  "any transactions in foreign exchange" and "importation and exportation" of any property of a foreign national.  

As I said, IEEPA is the law authorizing sanctions on countries and foreign individuals.  Until this year, it has never been used to impose tariffs.  To be fair, President Nixon did impose a 10% supplemental duty on all imports in order to address a currency crisis in 1971 under IEEPA's predecessor statue (Trading With the Enemy Act), and the Custom's Court upheld that duty.  The case upholding these tariffs, however, adopted some limits on this authority.  In particular, the court said that the Trading With the Enemy Act was “limited to articles which had been the subject of prior tariff concessions” and did not “tear down or supplant the entire tariff scheme of Congress.” 

The key legal issue, therefore, will be whether the admittedly broad language of IEEPA and the use of the Trading With the Enemy Act to impose a a tariff surcharge in 1971 gives the Trump Administration sufficient authority to impose massive tariffs on the entire world.  I think there is serious doubt that the courts would answer yes.

Critical to this issue is the U.S. Supreme Court's recent decision in West Virginia v. EPA, where the court said that where there is something extraordinary about the “history and breadth of the authority” an agency asserts or the “economic and political significance” of that assertion, courts should “hesitate before concluding that Congress meant to confer such authority."  In that case, the Court applied this principle to reject the EPA's claim for authority over an issue of "vast economic and political significance" where Congress has not clearly empowered the agency with power over the issue.  During the Biden Administration, the Court used this doctrine to strike down several claims of authority--most notably in striking down the Biden Administration's plan to forgive student loans.

It is not difficult to make the case that the extraordinary Trump tariffs--imposing a massive increase in tariffs globally-- is of vast economic and political significance and there is little evidence that Congress clearly gave such sweeping authority in IEPPA.  While Nixon imposed a tariff surcharge under the Trading With the Enemy Act, this surcharge acted within the  normal tariff framework at the time.  The Trump tariffs tear down the existing structure and impose the highest tariffs in U.S. history without any hint of Congressional action.

I think that a fair reading of IEPPA is that modest tariffs directed to particular countries is an authorized sanction in the President's tool box, but there is nothing in the legislative history of the Act that Congress intended the President to use IEEPA to ignore the Trade Law framework, and impose another framework altogether.  Simply put, there is no evidence that Congress intended to completely cede its constitutional power over tariffs to the President.

It will be interesting to watch the courts address the first legal challenge to the tariffs--and to see if other businesses and business groups have the courage to challenge the tariffs as well.  I also wonder with the Democratic Attorney Generals might have standing (since their States are major consumers of goods subject to the new tariffs) to challenge the tariffs as well.  There are many other potential legal arguments available to these potential plaintiffs, but I think the "major questions" line of cases is the most fruitful avenue of attack.

A Few Observations About the Trump Tariffs

 

Source: USITC and Yale Budget Lab

This charts says it all.  The Trump tariffs announced yesterday have resulted in an average US tariff rate higher than the infamous Hoover Administration era  Smoot-Hawley Tariffs that caused our economy to go into a tailspin. And the folks who know the US economy better than anyone--the folks that buy and sell stocks--have given their view of the tariffs:  as I write this, the S&P index is down more than 4%.

Here are some observations about the tariffs.

First, they stupidly include items that the US does not produce, and because of geography will likely never produce, including common grocery items as coffee, banana, winter fruits and vegetables, and chocolate.  To what end?  There won't be any insourcing of these items, and no new US jobs will result from the tariffs.  All that will happen is that the cost of groceries for Americans will go up for Americans.  The Yale Budget Lab model estimates that the tariffs will increase fresh produce by 4% and overall food prices will rise 2.8%.  

Second, for a large number of manufacturing items such as automobiles and smart phones, even if companies want to onshore production in the U.S., it will take years to make the adjustment.  Companies have to live with existing contractual arrangements and raise the capital and construct new facilities in the US.  This takes time, and given that tariff policy has become so political and unpredictable, it is not at all certain that companies will find new investments in the US to be a good bet.  In the meantime, US consumers have to live with higher prices.  The Yale Budget Lab Model predicts that the tariffs will increase the average price of an average 2024 new car by $4000.

Third, the new tariffs are not even remotely "reciprocal."   Our trading partners don't have tariffs even remotely as high as the Trump tariffs.  Instead, the tariffs were set by a formula that divided the trade deficit by the total total exports to America, despite the fact that country's trade deficit may have nothing to do with tariffs or other policies.  

Fourth, the impact on Americans from these tariffs will be significant.  The Yale Budget Lab Model estimates that the average household loss will be $2,100, with the highest impact (as a percentage of household income at the lower and middle income distribution. 

Finally, this strikes me as a rather significant action by the President.  It is effectively the most significant tax increase in American history,  In recent Supreme Court decisions, the Court  has said that the executive branch is limited in its ability to act on issues of great political or economic significance absent clear congressional authorization.  This principle was used to strike down the Biden Administration's student loan forgiveness initiative.  It seems to me that the biggest tax increase in US history qualifies as a matter of great economic significance, and reliance on vague emergency powers should not be sufficient.  I look forward to the conservatives on the Supreme Court acting in a principled way to struck down these tariffs.

Trump Is Apparently Pro-Parkinson's and Pro-Infectious Disease

 The National Institutes of Health is the largest funder of biomedical research in the world.  It has a remarkable list of accomplishments that has saved millions of lives including development of vaccines for hepatitis, HPV and polio, treatments for HIV/AIDS, cancer and Alzheimer's, and the  development of the MRI machine.  It also plays an important part of our economy--its basic research very commonly results in hugely profitable drugs and medical devices.

Given this history of success--that affects every American--NIH has benefitted from bipartisan support.  Its budgets have done well in both Republican and Democratic Administrations.  Until now.

Through a series of actions--the most dramatic occurring yesterday--the Trump Administration has gutted NIH.

• As I reported in a previous post, the Trump Administration has announced a new rule about reimbursement of indirect research costs that will have a devastating impact of the U.S. biomedical lab infrastructure.  Universities are already reducing the number of graduate students in biomedical fields,  The University of Pennsylvania has stopped doctoral admissions altogether.  
• The NIH has cancelled or suspended hundreds of research projects, including more than 100 clinical trials that may be forced to halt.  
• Yesterday, a large number of NIH employees were terminated.  The terminations were not just "administrative" positions--scientists were terminated as well.  The directs of five NIH institutes were reassigned to remote positions in the Indian Health Service, and key scientists overseeing projects on sickle cell disease, neurodevelopmental disorders and pandemic preparedness were terminated as well. At least ten principal investigators who were leading and directing medical research at NIH were fired, including a leading investigator on neurodegenerative disorders responsible for recent groundbreaking research on Parkinson's. 
• Remarkably "[r]oughly a  quarter of the agency's staff has been cut since the start of Trump's second term. " 

Sadly, despite their strong support for NIH in the past, key Republican members of Congress have been silent, apparently cowed by fear of MAGA.

The mystery is why this is happening.  I have a few theories.  First, most of the NIH research is done by Universities.  This could be yet another "own the Libs" initiative focused on Universities.  Second, Musk and his DOGE minions come from a tech bro culture that doesn't see the need for government-supported research.  The assumption is that Big Pharma will pick up the slack.  They are wrong.  Big Pharma largely invests only after the basic science is developed--which is what NIH does,  Finally, the new HHS Secretary and his spokesmen have touted the need to invest more in prevention and less in treatments,  It could be they see less value in developing new treatments for disease.

I doubt that the Trump voters thought that they were voting to halt research that could lead to promising new treatments for cancer, heart disease, Alzheimer's or Parkinson's,  but appears to be the directions of the Trump Administration.  Let's hope that Republican supporters of biomedical research in Congress finally show some courage and fight these devastating cuts.  (Don't hold your breath.)