Legal News for Tues 12/3 - McConnell Whines, Musk Doesn't Get Paid, Newsom's Anti-Trump Policy War Chest and Looming Social Security Insolvency

Minimum Competence

This Day in Legal History: Teddy Roosevelt, Trust Buster

On December 3, 1901, President Theodore Roosevelt delivered his first State of the Union address, where he boldly called for the dissolution of powerful business trusts. These trusts, large corporate conglomerates dominating key sectors like railroads, oil, and steel, were widely criticized for stifling competition and exploiting workers. Roosevelt argued that unchecked corporate power threatened the economic and political freedoms of ordinary Americans. This speech marked the beginning of Roosevelt’s aggressive antitrust campaign, which sought to enforce the Sherman Antitrust Act of 1890—a law that had been largely dormant due to weak enforcement.

During his presidency, Roosevelt initiated lawsuits against 44 trusts, targeting entities like the Northern Securities Company, a massive railroad monopoly, and Standard Oil. His administration’s victory in the 1904 Northern Securities case was a landmark decision, affirming the federal government’s authority to regulate monopolies. Roosevelt’s efforts earned him the nickname "Trust Buster," though he preferred to describe his approach as ensuring a "square deal" for all, rather than dismantling every large corporation indiscriminately.

The 1901 address and the actions that followed redefined the federal government’s role in economic regulation, setting a precedent for progressive reforms. Roosevelt’s trust-busting legacy laid the groundwork for future antitrust policies and established the President as a central figure in addressing economic inequality and corporate overreach.

Senate Minority Leader Mitch McConnell sharply criticized two federal judges for reversing their retirement plans, a move he claims prevents Donald Trump from filling their vacancies when he returns to the White House. Referring to the judges as "partisan Democrat district judges," McConnell accused them of undermining the electoral mandate by remaining active after the November election results. Though he didn’t name them, McConnell's comments were aimed at U.S. District Judges Algenon Marbley and Max Cogburn, appointees of Bill Clinton and Barack Obama, respectively, who had previously indicated they would take senior status—a semi-retirement—pending Senate confirmation of successors.

McConnell labeled the judges’ decisions as partisan interference, urging the incoming administration to consider recusal options for them. He also claimed their actions reflect a “political finger on the scale,” though no historical precedent or formal violation underpins his accusations. Notably, judicial replacements for both seats faced delays during Biden's administration due to Senate procedural traditions and partisan gridlock, complicating the nomination process.

McConnell's critique appears selective, given his own record of partisanship in judicial confirmations. Senate Judiciary Chair Dick Durbin countered by highlighting McConnell’s refusal to advance Merrick Garland’s Supreme Court nomination during Obama’s presidency—a move widely criticized as unprecedented gamesmanship. McConnell also criticized appellate judges who announced retirements contingent on successor confirmations, calling potential reversals "unprecedented," despite the lack of ethical violations or rule breaches. Critics argue McConnell’s remarks exemplify a strategic focus on judiciary control rather than a genuine concern for ethics or impartiality.

McConnell Blasts Judges Who Reversed Retirement Post-Trump Win

Elon Musk’s $56 billion Tesla compensation package was invalidated by Delaware Chancery Court Judge Kathaleen McCormick, marking a significant legal setback for the billionaire. The judge ruled that Tesla’s board had been improperly influenced by Musk when it approved the plan in 2018, describing the arrangement as excessive and criticizing the board for capitulating to Musk’s demands. This decision upheld her earlier January ruling, rejecting arguments from Musk and Tesla shareholders who had voted to revive the package.

The ruling not only voids the record-setting payout but also requires Tesla’s board to propose a new compensation plan, though the company has announced plans to appeal. Musk, the world’s richest person, reacted by labeling the decision “absolute corruption” on his social media platform, X. The court also awarded $345 million in attorney fees to the shareholder lawyers who challenged the package, marking one of the largest legal payouts in U.S. shareholder litigation.

The compensation case stemmed from a lawsuit alleging that Tesla’s board failed to act independently and allowed Musk to orchestrate the details of his pay package. McCormick dismissed arguments that shareholder approval could override her judicial findings, emphasizing the limits of post-trial actions in reversing decisions. Tesla shares fell after the ruling, and the decision could prompt further scrutiny of corporate governance at the company.

Musk’s Multibillion-Dollar Tesla Payout Gutted by Delaware Judge

Delaware judge rejects Musk's $56 billion Tesla pay - again | Reuters

California Governor Gavin Newsom has proposed a $25 million legal fund to prepare for potential conflicts with President-elect Donald Trump’s administration. Announced during a special legislative session, the fund aims to bolster the state’s ability to challenge federal policies on issues like reproductive rights, immigration, and environmental protection. Newsom emphasized that the initiative seeks to protect critical state resources, such as disaster relief and health care, while safeguarding civil rights and reproductive health care access.

The funding would enable the California Department of Justice and other state agencies to swiftly respond to federal actions, with Attorney General Rob Bonta planning to expand staffing for legal battles. California has a history of such litigation, having spent $42 million during Trump’s first term and filing over 120 lawsuits against his administration. Newsom cited past successes in securing funding and reversing federal actions as evidence of the strategy’s effectiveness.

The proposal also aligns with new legislative measures to protect abortion rights, including access to medication and enforcement of the state’s Reproductive Privacy Act. Newsom’s office expects the budget measure to pass before Trump’s inauguration on January 20, ensuring California’s readiness to counter any federal policies that could impact the state’s economy or public services.

California governor proposes $25 million war chest for legal fights with Trump | Reuters

My column for Bloomberg this week tackles the looming funding crisis facing Social Security, one of America’s most vital anti-poverty programs. Without intervention, the program will face a shortfall by 2035, jeopardizing benefits millions of Americans rely on. To avert this crisis, I propose two practical and politically feasible solutions: raising the cap on taxable income and expanding Social Security taxes to include investment income.

Currently, income above $168,600 is exempt from Social Security taxes, creating a regressive structure where high earners contribute a smaller share of their total income. Eliminating or significantly increasing this cap would not only generate substantial revenue but also ensure a fairer tax burden. Public opinion overwhelmingly supports this approach, favoring tax adjustments over benefit cuts or increasing the retirement age.

Beyond raising the cap, policymakers should modernize the tax base by including investment income such as capital gains, dividends, and interest. In 2024, Americans earned $3.7 trillion in investment income, much of it untaxed for Social Security purposes. Even modest taxation on this income, especially above high thresholds like $400,000, could secure the program’s solvency while reflecting the realities of modern wealth generation.

Opponents might argue that taxing investments could harm economic growth, but careful, incremental adjustments would likely have minimal impact on investor behavior. Acting now allows for gradual changes and avoids drastic measures later, ensuring Social Security continues to deliver on its promise of financial security for all contributors.

Social Security Faces a Crisis, but Sound Tax Policy Can Help

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