[00:00:02] Speaker 00:
Case number 15-5065, Victor K. Williams, Appellate, versus Jacob J. Lew, in his official capacity as Secretary of the U.S.

[00:00:10] Speaker 00:
Treasury Department in the United States Department of the Treasury.

[00:00:13] Speaker 00:
Mr. Florence for the Appellant, Ms.

[00:00:15] Speaker 00:
Silphin for the Appellees.

[00:00:19] Speaker 05:
Good morning, Your Honors.

[00:00:20] Speaker 05:
May it please the Court?

[00:00:21] Speaker 05:
My name is Justin Florence, and I represent the Appellant, Victor Williams.

[00:00:25] Speaker 05:
I'd like to reserve two minutes.

[00:00:27] Speaker 05:
The district court abused its discretion when it denied Mr Williams's motion for leave to amend in a simple minute order with no explanation at all under phone.

[00:00:36] Speaker 04:
That's the case.

[00:00:39] Speaker 04:
We have this up here for an over review anyway, right?

[00:00:43] Speaker 05:
The it is de novo review on his appeal of the motion to dismiss the prior complaint, but the failure to grant leave to amend under Rule 15 is reviewed for abuse of discretion.

[00:00:55] Speaker 04:
If we have the case here for de novo review and proposed amendment,

[00:01:05] Speaker 04:
Why should we not just enter the judgment ourselves?

[00:01:09] Speaker 05:
Well, let me take that.

[00:01:10] Speaker 05:
Let me take that question on in a couple of parts.

[00:01:13] Speaker 05:
The first is with respect to the Rule 15 standard, and both the Supreme Court and this court have been quite clear that the district court must provide reasons if it denies leave to amend.

[00:01:25] Speaker 04:
We've also been quite clear that we review dismissals.

[00:01:30] Speaker 04:
You know, and you can't come in and make a

[00:01:39] Speaker 04:
and find the error in the dismissal of the complaint.

[00:01:42] Speaker 04:
So you better deal with the question of whether you have a standing problem under the new amendment, just as you did under the old one.

[00:01:52] Speaker 05:
Absolutely, Your Honor.

[00:01:53] Speaker 05:
And I'd be happy to return to the Rule 15 issue later, but... I can't agree for anything.

[00:01:58] Speaker 04:
I just don't think there's an issue there.

[00:02:00] Speaker 04:
If the answer to this question is as I pose it.

[00:02:03] Speaker 05:
So let me take this question on, because there is a very distinct injury alleged in the subsequent proposed complaints that was not considered by the district court on the prior complaint.

[00:02:17] Speaker 03:
OK.

[00:02:18] Speaker 03:
Before you get into that, or as an introduction to that, let me ask you this.

[00:02:24] Speaker 03:
As I read the complaint, there are several different theories of standing.

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and you're new to this case, which theory do you think is strongest for your client and which theories set forth in the brief are you actually pursuing here?

[00:02:46] Speaker 05:
The theory we're pursuing is the economic injury that has already occurred, that is the diminution in value of specific treasury securities that Mr. Williams has owned.

[00:02:57] Speaker 05:
That is to answer Joe Santella's question.

[00:02:59] Speaker 05:
What I believe is that you think the court could rat to remedy this claimed injury.

[00:03:04] Speaker 05:
There are a couple of different orders that would remedy it.

[00:03:07] Speaker 05:
One would be, with respect to Mr. Williams's facial challenge, to invalidate the statute, the debt limit statute, which calls into question the public debt.

[00:03:15] Speaker 05:
But there are narrower remedies.

[00:03:16] Speaker 04:
The facial challenge that comes from the 14th Amendment that says the debt shall not be called into question, the relief you're asking for is the striking of a statute that doesn't call that into question.

[00:03:26] Speaker 04:
I agree.

[00:03:31] Speaker 02:
I don't understand your theory.

[00:03:33] Speaker 02:
Your theory is that the debt limit statute is unconstitutional.

[00:03:38] Speaker 02:
That's not what's unconstitutional.

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It can't be unconstitutional for Congress to say you can only borrow X amount of dollars.

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It's the disregard

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of that statute that causes the economic problem you're alleging, isn't it?

[00:03:52] Speaker 02:
And how does a court redress that?

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Tell Congress to balance the budget?

[00:03:56] Speaker 02:
I mean, how do you do that?

[00:03:57] Speaker 05:
The complaint includes both a facial and an as-applied challenge.

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And it could be remedied either by finding the statute invalid or by a narrower remedy, which would direct it to Treasury Department.

[00:04:09] Speaker 02:
Address the facial challenge for me first, then.

[00:04:12] Speaker 02:
How is this statute unconstitutional?

[00:04:14] Speaker 05:
So the 14th Amendment, Section 4, says that the validity of the public debt shall not be questioned.

[00:04:20] Speaker 05:
And looking at the legislative history of that and the language in Congress's choice of the word questioned, the focus was very clearly on ensuring confidence that the debt would always be paid.

[00:04:30] Speaker 02:
And so that language bars Congress from saying the United States can only borrow so much money.

[00:04:37] Speaker 05:
Is that right?

[00:04:38] Speaker 05:
I think what it bars Congress from saying is that in the event that additional borrowing is needed to make payments on currently outstanding public debt, Treasury may not do that borrowing.

[00:04:51] Speaker 03:
And I do want to return that there is a... Suppose we were 50 years ago and the political controversy over spending and the debt ceiling had never risen.

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And we had a debt ceiling statute, but there had never been a threat to default.

[00:05:14] Speaker 03:
Would you still have standing?

[00:05:16] Speaker 03:
I mean, would you still have a claim that the statute's unconstitutional?

[00:05:19] Speaker 05:
I think we might still have a claim on the merits.

[00:05:21] Speaker 05:
I'm not sure in that situation if we'd have standing, because the economic injury that has arisen has arisen because of the- Okay, but why would you have, let's take it, why would you have, why would there be a claim at all?

[00:05:33] Speaker 03:
If the first 150 years of our history, we had a debt ceiling statute, and there had never been a threat to default, ever, would it be unconstitutional?

[00:05:45] Speaker 05:
I think it could be unconstitutional to the extent it calls into question whether the debt will be paid.

[00:05:50] Speaker 04:
Now, there is a much narrower- It sounds like you're abandoning any hope of a facial debt.

[00:05:59] Speaker 04:
You are abandoning the facial challenge.

[00:06:02] Speaker 05:
We're not abandoning it, and we believe... You seem to be abandoning it.

[00:06:07] Speaker 03:
But given the court's questions, I do want to focus on the narrower as applied challenge, which is that... By the way, the brief says that because it's a facial challenge, you don't need to meet the standard rules of standing.

[00:06:18] Speaker 03:
Do you still defend that?

[00:06:19] Speaker 05:
No, we believe that we do meet the standard rules of standing that there has been a clear economic injury.

[00:06:24] Speaker 05:
And just to be clear about the injury, because that was the one issue that the district court considered in its motion to dismiss with whether there was an injury in fact, and I refer the court to page 173 injury in fact caused by this.

[00:06:39] Speaker 05:
that.

[00:06:41] Speaker 04:
And how long has that statute been there?

[00:06:44] Speaker 05:
The very first debt limit statute was in 1917, and there have been various variations.

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But I want to be clear that about two points.

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One is that the district court looked at only an anticipated future injury that might arise in the event of a default.

[00:07:01] Speaker 05:
What the subsequent proposed complaints allege is a distinct injury, which is the current injury that already occurred when the market value

[00:07:09] Speaker 05:
Yes, there is.

[00:07:11] Speaker 05:
And I would refer the court to the GAO report that's referenced throughout Mr. Williams's briefs.

[00:07:16] Speaker 04:
On page 16 of that report... Let me take you back instead to what remedy it is you think we could do if you were right about this.

[00:07:26] Speaker 04:
Sure.

[00:07:27] Speaker 04:
What remedy is it?

[00:07:29] Speaker 05:
So a narrower remedy would be the complaints alleged

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at length, that one cause of this injury has been the Treasury Department's statements about the threat to bondholders.

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For example, on paragraph 25, there's a quote of Secretary Wu talking about how bondholders are threatened.

[00:07:45] Speaker 05:
And a narrower remedy would be an order saying that notwithstanding the presence of the debt limit statute, the Treasury must make payments on principle and interest of all outstanding federal debt.

[00:07:58] Speaker 02:
Does the 14th Amendment require that?

[00:08:00] Speaker 05:
Already?

[00:08:01] Speaker 05:
That's our client's position.

[00:08:03] Speaker 02:
The problem, however... So you have a situation where the executive is caught between the demands of the Constitution, as you understand, and a Congressional enactment.

[00:08:14] Speaker 02:
What role do we have to play in the resolution of that?

[00:08:18] Speaker 05:
The role is to remedy the injury that our client has suffered in the diminished economic value of his bonds that's been created by both the Congress and the Treasuries

[00:08:26] Speaker 05:
questioning whether that stands, and the GAO report that I referenced shows in the periods when these impasses arise.

[00:08:41] Speaker 05:
No, it wouldn't go to who says what.

[00:08:45] Speaker 04:
It would go to... Tell me what that order is again, then.

[00:08:47] Speaker 04:
I thought that when I asked you the remedy, you said, well, they're out there talking about this bad debt.

[00:08:51] Speaker 04:
Tell them to quit doing that.

[00:08:53] Speaker 05:
The order would say that notwithstanding the presence of the Debt Limit Statute, the Treasury Department shall pay principal and interest on all outstanding debt.

[00:09:03] Speaker 04:
Have they failed to do so?

[00:09:05] Speaker 05:
They have not, but... They have not.

[00:09:07] Speaker 04:
Is there any reason to believe right now that they're going to do so?

[00:09:11] Speaker 05:
There is, if you look at the allegations in the complaint about... I'm not looking at just the allegations in the complaint.

[00:09:16] Speaker 04:
Now, you cannot, normally, you can't just allege something and make it important to accept it as being reasonable.

[00:09:24] Speaker 05:
I think there is a reasonable basis for that, and I'd again refer to the GAO report, which... This sounds like you're asking for an advisory opinion.

[00:09:31] Speaker 04:
I think John Marshall said something about that a long time ago.

[00:09:34] Speaker 05:
No, it's not at all an advisory opinion.

[00:09:36] Speaker 05:
It's an opinion that would cure the economic injury that's already arisen by the decline in market value.

[00:09:41] Speaker 04:
And the GAO report... How can we order this curatory that you're talking about?

[00:09:46] Speaker 04:
That can afford order.

[00:09:47] Speaker 04:
This be cured.

[00:09:48] Speaker 04:
Market don't react negatively toward these bond prices.

[00:09:51] Speaker 05:
It wouldn't be saying market don't react negatively.

[00:09:54] Speaker 05:
It would be saying, notwithstanding this statute, Treasury must pay principal and interest.

[00:09:59] Speaker 05:
And we believe that the market would react to that in a way that would address and remedy the economic harm that has been suffered.

[00:10:09] Speaker 05:
But the GAO report is quite clear that it is the questioning that arises because of the statute and how it's enforced.

[00:10:15] Speaker 03:
How would you articulate the standard we're supposed to apply at this point to William's allegation of standing?

[00:10:25] Speaker 03:
What is it?

[00:10:26] Speaker 03:
What's the standard?

[00:10:28] Speaker 03:
You can keep going.

[00:10:29] Speaker 05:
So under the Wuhan case, there is a sentence in that case at the motion to dismiss, which is where we're at.

[00:10:36] Speaker 05:
General allegations are to be accepted, and the court should presume that specific facts will be available to support those.

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those facts will be available at a later stage.

[00:10:48] Speaker 05:
Mr. Williams can show which specific securities he owned and how they diminished in value.

[00:10:53] Speaker 03:
And what's your view about what the Supreme Court has said several times recently, just as recently in Clapper, that because principles of standing serve separation of powers concerns,

[00:11:12] Speaker 03:
that especially when a plaintiff seeks to have a law of Congress declared unconstitutional, the court says our standing inquiry has been especially rigorous.

[00:11:31] Speaker 03:
So what do you think that tells us about how to look at this case?

[00:11:35] Speaker 05:
We'd accept that under any rigorous standard, we would meet the three article three factors.

[00:11:40] Speaker 05:
There is a classic.

[00:11:41] Speaker 03:
Well, let's stick with just the factor you're talking about, which is the present injuries.

[00:11:47] Speaker 05:
So I would refer the court to page 159 of the Joint Appendix, which is the government's reply brief in the district court.

[00:11:54] Speaker 05:
And they say,

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This is based on the prior complaint that the plaintiff hasn't alleged a concrete injury such as a diminution in economic value.

[00:12:03] Speaker 05:
Now, the subsequent complaints submitted for which Mr. Williams stopped me to amend do allege that very injury, which is just an important one.

[00:12:12] Speaker 04:
How can a statute that's existed since 1917 be the legal cause of recent diminution, if there is any, in his bondholding case?

[00:12:22] Speaker 05:
because the statute has been enforced in new ways.

[00:12:24] Speaker 04:
Recently, we've reached the debt limit as a result of reaching you're giving us an enforcement that we could enjoy everything else that you're saying made sense.

[00:12:35] Speaker 04:
Uh, you're not coming in.

[00:12:36] Speaker 04:
You're saying with being enforced in a fashion that you need to enjoy, you're telling us we should just say this statute is unconstitutional.

[00:12:43] Speaker 04:
So as I said, we exist into the statute.

[00:12:47] Speaker 04:
You seem to have admitted a moment ago is not what's going on.

[00:12:50] Speaker 04:
It's something about the enforcement.

[00:12:53] Speaker 05:
We think that now is causing the heart, but both the existence of the statute and the way it's been applied.

[00:12:58] Speaker 04:
And I would reiterate that he bought long after 1917.

[00:13:02] Speaker 04:
He did.

[00:13:03] Speaker 04:
And now you're saying that this that you.

[00:13:15] Speaker 04:
this year or last, 2016 or 2015, whenever we look at it.

[00:13:20] Speaker 04:
Does that make sense to you, Counsel?

[00:13:21] Speaker 04:
It does, because... You never say that with straight face, Counsel.

[00:13:24] Speaker 05:
I am, and I would again just ask the Court to look at the GAO report, which is quite clear, based on market data and interviews with large financial participants, that the presence of the statute... Where in the complaint is it alleged that Mr. Williams was personally among the class of bondholders injured?

[00:13:43] Speaker 05:
So paragraph 1 of the proposed amended complaint in the district court.

[00:13:49] Speaker 02:
And this is the third amended complaint?

[00:13:51] Speaker 05:
This is the proposed second amended complaint, the one on which the district court denied leave to amend.

[00:13:55] Speaker 03:
You're looking at paragraph 2, right?

[00:13:57] Speaker 05:
Paragraph 2?

[00:13:59] Speaker 05:
Paragraph 2 of the complaint submitted in this court.

[00:14:02] Speaker 03:
Yeah, I understand.

[00:14:03] Speaker 05:
And paragraph 41 and footnote 3 of the complaint submitted in this court.

[00:14:07] Speaker 05:
with various securities that he owned.

[00:14:10] Speaker 05:
And he talks about how he owns bonds of different durations and different maturity dates.

[00:14:14] Speaker 05:
And if one looks at that GAO report, you can line up the different securities he owned and see their diminution in value.

[00:14:21] Speaker 04:
The part of the GAO report that says that the existence of this statute is called diminution in that class of bond holding.

[00:14:29] Speaker 04:
I don't have a quote off the top of my head.

[00:14:31] Speaker 04:
I don't think you do.

[00:14:32] Speaker 04:
I don't think that's quite what it says.

[00:14:34] Speaker 05:
Well, I would refer the court to two parts of that.

[00:14:37] Speaker 05:
One is pages 12 through 16, which describe what has happened.

[00:14:41] Speaker 05:
The other is that the report includes recommendations at the end about how this problem could be addressed.

[00:14:46] Speaker 04:
Is one of those abolishing this?

[00:14:49] Speaker 05:
Yes, it is.

[00:14:50] Speaker 05:
Yes.

[00:14:51] Speaker 05:
And revising the way that it is, that it works.

[00:14:54] Speaker 04:
And revising the way that it works and abolishing it are not consistent

[00:15:00] Speaker 05:
I'd have to look exactly at what it is, but in either event, the point is that the presence and that GAO reaches a conclusion that the presence of the debt statute as it stands now does cause this problem.

[00:15:15] Speaker 03:
So when I asked you my earlier question about suppose

[00:15:22] Speaker 03:
We were years ago, in the good old days, and this wasn't happening.

[00:15:27] Speaker 03:
And you said you'd still have a case on the merits, but you conceded you wouldn't have standing, right?

[00:15:32] Speaker 05:
I said that we might not have standing because we might not have suffered an economic injury, but I think it would be a harder case for standing.

[00:15:39] Speaker 03:
Well, in this case, let me see if I have it right, under the current debt ceiling statute,

[00:15:45] Speaker 03:
Nothing can happen until, what is it, February 2017?

[00:15:50] Speaker 05:
I think it's March of 2017.

[00:15:52] Speaker 03:
March 2017.

[00:15:53] Speaker 03:
And at that point, am I right also, that the debt ceiling rises automatically to whatever the national debt is at that point, right?

[00:16:01] Speaker 05:
It does.

[00:16:02] Speaker 05:
It is set.

[00:16:02] Speaker 05:
OK.

[00:16:03] Speaker 03:
So how?

[00:16:08] Speaker 03:
How do you make the case that, since you've pretty much admitted in response to questions from my two colleagues that this is mostly an as applied challenge, given that we're a year and a half away from something like this and that even in March 2017 there won't be a crisis, where is the current injury?

[00:16:33] Speaker 03:
How do we know that it's plausible to think that

[00:16:38] Speaker 03:
bonds and other treasuries' values are reduced today.

[00:16:44] Speaker 05:
I don't know that.

[00:16:45] Speaker 05:
So two answers on that.

[00:16:46] Speaker 05:
First, the complaint, and this is paragraph three of the complaint that was submitted in the district court, paragraph two of the complaint in this court, does allege on its face a current ongoing injury and given the loop on the state.

[00:16:58] Speaker 03:
But under Twombly and under our standing cases, the claim has to be plausible.

[00:17:04] Speaker 05:
So the GAO report, in addition to talking about the concrete economic diminution that's happened in the past, notes that steps that large financial market participants are taking to avoid owning these types of securities in the future.

[00:17:19] Speaker 05:
And we think it's implausible, given that there wouldn't be some sort of market effect that we could show at summary judgment.

[00:17:25] Speaker 05:
Now, a second point is that even if we couldn't show that at this exact moment, the specific securities he owns are diminished in value because of this,

[00:17:34] Speaker 05:
This is an injury that has recurred repeatedly in 2011, and 2013, and 2014.

[00:17:39] Speaker 03:
Then you have a real problem.

[00:17:43] Speaker 03:
Then you're talking about future harm.

[00:17:45] Speaker 05:
No, we think we're talking about an injury that's recurring and capable of evading review.

[00:17:49] Speaker 03:
One last question.

[00:17:50] Speaker 03:
If it's true that these securities are reduced in value, wasn't that priced into whatever Mr. Williams paid for his treasuries?

[00:18:03] Speaker 05:
Not necessarily because he's purchased them at different points.

[00:18:06] Speaker 05:
So for example, the... This has been going on for years.

[00:18:09] Speaker 05:
It's 1970 with that led.

[00:18:13] Speaker 03:
So why would the market have accounting for that?

[00:18:15] Speaker 05:
In October 2013, he purchased a four-week treasury security at par value.

[00:18:22] Speaker 05:
And within a week or two of that, there had been a change of 50 basis points in the price, which is just dramatic.

[00:18:28] Speaker 05:
So that is just one concrete example.

[00:18:31] Speaker 05:
I would just note to the court that these are all the types of questions that the district court never got a chance to look at because it denied a week to amend on the complaint that did allege the economic injury.

[00:18:42] Speaker 03:
OK, thank you.

[00:18:44] Speaker 05:
Thank you, Your Honors.

[00:18:47] Speaker 05:
I hope she'll be brief.

[00:18:54] Speaker 01:
May it please the court.

[00:18:56] Speaker 01:
I just wanted to point out one thing, which is, well,

[00:19:00] Speaker 01:
Even given that the statute is not in effect until March 2017, on top of that, Mr. Williams has specifically said that he isn't planning on selling any of his securities.

[00:19:13] Speaker 01:
So even if he could allege this current diminution in the value of his securities,

[00:19:21] Speaker 01:
it wouldn't affect him because he specifically said he's going to wait until their term ends and then he'll receive the full value back.

[00:19:32] Speaker 02:
We're at the motion to dismiss stage, right?

[00:19:34] Speaker 02:
And we're supposed to be, notwithstanding Twombly or even consistent with Twombly, we have a more generous view, right?

[00:19:41] Speaker 02:
We have to assume that he can prove what he alleges.

[00:19:45] Speaker 02:
Hasn't he alleged that he owns bonds that are adversely affected by

[00:19:52] Speaker 02:
I'm not certain what, but I'm actually affected by at least the interplay between the statute and the decisions of the executive and spending of Congress.

[00:20:01] Speaker 02:
Hasn't he shown that he's been harmed?

[00:20:03] Speaker 02:
Even if he had shown that, he still... Let's leave redressability to one side.

[00:20:10] Speaker 02:
Hasn't he alleged that he's been harmed?

[00:20:14] Speaker 01:
But he has specifically, explicitly, in his reply brief, disavowed an intent to sell it.

[00:20:20] Speaker 03:
Why don't you just drop that argument for a minute?

[00:20:23] Speaker 03:
Any answer to the question Judge Griffith is asking you?

[00:20:25] Speaker 03:
Has he been hired?

[00:20:26] Speaker 03:
His claim, why isn't his claim plausible?

[00:20:30] Speaker 03:
That's our standard.

[00:20:32] Speaker 03:
That's the question.

[00:20:33] Speaker 03:
Don't respond with your backup argument.

[00:20:35] Speaker 01:
Sure, so there are several reasons why it's not plausible.

[00:20:40] Speaker 01:
One, which is that it is speculative, that it is based on his end.

[00:20:46] Speaker 03:
That's the future harm.

[00:20:47] Speaker 03:
He's claiming now that the value of his securities are depressed currently.

[00:20:54] Speaker 03:
There's no speculation in that.

[00:20:56] Speaker 03:
There's no future harm he's alleging.

[00:20:57] Speaker 03:
He's saying they're currently worthless because of the constant threat of the fall.

[00:21:03] Speaker 03:
And isn't that perfectly plausible?

[00:21:05] Speaker 01:
I mean, it could be, but he would have to have some interest in selling them.

[00:21:10] Speaker 03:
Because if he's going to wait until- Don't keep going back, please.

[00:21:12] Speaker 03:
It's not going to help your argument if you keep going back.

[00:21:15] Speaker 03:
We've got that argument.

[00:21:17] Speaker 03:
Maybe you're right for that reason.

[00:21:19] Speaker 03:
But both Judge Griffith and I have asked you a different question.

[00:21:22] Speaker 03:
The question we look at is, is his allegation about current diminished value plausible?

[00:21:30] Speaker 03:
I think it's... Now you say there are several reasons why it's not plausible.

[00:21:34] Speaker 03:
You agree that's the standard we ask at this point, right?

[00:21:36] Speaker 01:
Yes.

[00:21:37] Speaker 03:
Okay.

[00:21:38] Speaker 03:
So setting aside your argument about he might not sell it, and maybe that's right.

[00:21:44] Speaker 03:
Tell me why.

[00:21:45] Speaker 03:
Or is that your only argument?

[00:21:47] Speaker 03:
No, that's not.

[00:21:48] Speaker 03:
Then what's your other argument?

[00:21:50] Speaker 01:
Well, on top of that, the statute currently isn't in effect.

[00:21:56] Speaker 01:
And it's suspended.

[00:21:58] Speaker 01:
So it cannot be harming him currently when it's not in effect.

[00:22:04] Speaker 03:
Well, his argument is that the future threat of default, which could occur in March 2017, bonds are being sold now, whose lifetime goes beyond March 2017.

[00:22:23] Speaker 03:
His argument is that those bonds are depressed in price.

[00:22:30] Speaker 03:
Now, if the current statute went for 10 years, you might have an argument.

[00:22:37] Speaker 03:
But particularly when you look at the GAO report, which does seem to suggest that sellers and purchasers of bonds are accounting for the constant threat of default, I guess I just don't see why it isn't at least plausible.

[00:22:54] Speaker 03:
Now, maybe it's summary judgment.

[00:22:57] Speaker 03:
you know, this case becomes extremely easy.

[00:22:59] Speaker 03:
But we're not there, right?

[00:23:02] Speaker 01:
I have two responses to that.

[00:23:05] Speaker 01:
One is that the market's fear of a future harm

[00:23:10] Speaker 01:
is addressed in Clapper as not being a basis for standing.

[00:23:14] Speaker 03:
No, we're not talking about his emotional part.

[00:23:17] Speaker 03:
I totally agree with you about that.

[00:23:18] Speaker 01:
Well, right, but the market as a whole, having this fear is what he's alleging is causing the prices to increase.

[00:23:25] Speaker 02:
But he's alleging it's causing it now, that right now, as we speak,

[00:23:31] Speaker 02:
His bonds are worth less than they would otherwise have been if there wasn't a threat of default.

[00:23:38] Speaker 02:
Even though the threat of default's put off for another year or so, that the markets now reflect that.

[00:23:43] Speaker 02:
And isn't that plausible?

[00:23:45] Speaker 01:
That's not crazy.

[00:23:46] Speaker 01:
That's what he's saying.

[00:23:48] Speaker 02:
And that's what we look at, right?

[00:23:50] Speaker 02:
That's what he's saying.

[00:23:51] Speaker 02:
And is your argument that that's not a harm?

[00:23:54] Speaker 02:
I know you have other arguments that are redressability, but that fact alone, that's a harm, right?

[00:23:59] Speaker 01:
Well, but it's a speculator.

[00:24:01] Speaker 01:
It's the market speculating that is causing that depressed party.

[00:24:07] Speaker 04:
The calculation would be for the independent act of third parties, not of the, I guess it's Congress we're supposed to be adjoining.

[00:24:15] Speaker 04:
I'm not, he has treasury as the defense.

[00:24:18] Speaker 04:
It's a little hard to figure out how Treasury's causing him any harm, but in any event, it's the independent act of a third party so that you don't have a direct chain of causation for standing purposes.

[00:24:29] Speaker 03:
I agree with that, Your Honor.

[00:24:31] Speaker 03:
Suppose I want to buy a house, and I have two houses I'm looking at.

[00:24:37] Speaker 03:
One is in a subdivision that allows you to build swimming pools, and the other is in a subdivision that doesn't.

[00:24:49] Speaker 03:
And they're identical houses.

[00:24:51] Speaker 03:
And the house in the subdivision where you can't build a pool is priced at a lower rate, lower price.

[00:25:01] Speaker 03:
Do you mean if I bought that house I wouldn't have standing to challenge the limitation because the market is speculating that it's a lower price?

[00:25:10] Speaker 01:
No, no.

[00:25:11] Speaker 01:
I think you would have standing to challenge that.

[00:25:13] Speaker 03:
Well, but isn't it exactly the same thing?

[00:25:14] Speaker 03:
The market is lower because other buyers won't pay as much for it.

[00:25:20] Speaker 03:
So therefore, the price is less.

[00:25:21] Speaker 01:
Well, there are innumerable different forces on the market that could be causing any specific depression in the price.

[00:25:31] Speaker 01:
It's hard to speculate on exactly what would be causing it.

[00:25:34] Speaker 03:
I just don't understand your argument that the reduced value in his

[00:25:39] Speaker 03:
Assuming the treasuries are reduced in value because of the threat.

[00:25:49] Speaker 03:
They're reduced in value because they're valued less by the market.

[00:25:54] Speaker 03:
That's not the kind of speculation the court is talking about in Article III injury cases.

[00:26:02] Speaker 03:
I think what the court is talking about there is the plaintiff speculating about possible injury.

[00:26:09] Speaker 03:
Not with it.

[00:26:09] Speaker 03:
I mean, I don't think I've ever heard a suggestion that damage from a devalued market doesn't provide standing because the market is based on the speculation of investors.

[00:26:21] Speaker 03:
Does that really make sense to you?

[00:26:23] Speaker 03:
If you know any case that says that?

[00:26:26] Speaker 01:
I don't think that is it.

[00:26:28] Speaker 01:
That's not the argument I'm making.

[00:26:30] Speaker 04:
It seemed to be what you said.

[00:26:31] Speaker 04:
I'm just wondering if that's really your best argument with all this.

[00:26:35] Speaker 04:
other possibilities.

[00:26:36] Speaker 04:
Do you really want to try to defend the proposition that diminution in value is not damage, not harm for standing purposes?

[00:26:44] Speaker 01:
As you point out, there are many, many different arguments in this case.

[00:26:48] Speaker 04:
I don't think you want to pick that niche today.

[00:26:50] Speaker 03:
Tell us your best one.

[00:26:52] Speaker 03:
Tell us, setting aside your argument that he hasn't alleged he wants to sell them.

[00:26:55] Speaker 03:
I got that.

[00:26:56] Speaker 03:
What's the best argument that this injury is not plausible?

[00:27:00] Speaker 01:
It's a combination of the statute not being in effect.

[00:27:05] Speaker 01:
Even if it were in effect, there's a series of highly speculative events that would be required before there could be any harm.

[00:27:13] Speaker 03:
That relates to his claim about future injury, which counsel sort of said he wasn't pursuing.

[00:27:19] Speaker 01:
Right.

[00:27:19] Speaker 01:
But then when you're talking about his argument that there's a current reduction in value,

[00:27:30] Speaker 01:
it could be based on innumerable different market forces.

[00:27:35] Speaker 01:
And I don't even think one of them could be the statute, which is not in effect.

[00:27:40] Speaker 03:
So the only piece of evidence we have is the GAO report, which is quoted.

[00:27:44] Speaker 03:
And it says that in the face of one of these threatened defaults, the Treasury's actions, that is, its extraordinary steps, caused interest rates on these securities to increase.

[00:28:00] Speaker 03:
and cause decline in liquidity.

[00:28:02] Speaker 03:
So here you have a government accounting office report saying that interest rates were depressed and there were liquidity problems relating to this.

[00:28:13] Speaker 03:
So again, the only question is plausibility.

[00:28:18] Speaker 01:
And respectfully, the report is referring to harms to the entire economy, not to harms to bondholders in particular.

[00:28:27] Speaker 03:
It says, these actions cause interest rates on at-risk securities to reduce.

[00:28:33] Speaker 03:
He owns these bonds.

[00:28:35] Speaker 03:
His interest rates went up.

[00:28:37] Speaker 03:
The liquidity went down.

[00:28:38] Speaker 03:
It's talking about owners of these bonds.

[00:28:41] Speaker 01:
And he's talking about the harm to the entire economy that could come from Congress defaulting on the government's debt, which is something that... One last question.

[00:28:53] Speaker 03:
Suppose the plaintiff was not Professor Williams, but Goldman Sachs that has a trillion dollars worth of treasuries.

[00:29:02] Speaker 03:
Would that make a difference?

[00:29:03] Speaker 01:
No, Your Honor, it wouldn't.

[00:29:05] Speaker 01:
It's the same, it would be the same alleged speculative injury as well as the alleged injury based on the entire market.

[00:29:18] Speaker 03:
What do you think about Council's first argument that we should just simply reverse this because of the abuse of discretion in rejecting the amended complaint?

[00:29:27] Speaker 03:
It was clearly under this circuit's law, an abuse of discretion to reject an amended complaint without giving a reason, right?

[00:29:35] Speaker 01:
Respectfully it would be I think it would be futile to allow him to amend his complaint and and so any error would be harmless Did mr. Lawrence anything

[00:29:53] Speaker 03:
If you would like it.

[00:29:55] Speaker 05:
Thank you, Your Honors.

[00:29:56] Speaker 05:
Just two quick points.

[00:29:58] Speaker 05:
One is to follow up on Judge Sentel's question about the GAO report's recommendations for actions that could cure this problem.

[00:30:05] Speaker 05:
And one of those option three is described as delegating authority to the administration to borrow as necessary to fund its existing requirements.

[00:30:14] Speaker 05:
So that is a potential remedy that's in there.

[00:30:17] Speaker 05:
But I also want to just close on the rule.

[00:30:20] Speaker 04:
Do you really think we could tell Congress to delegate that authority to the administration?

[00:30:26] Speaker 04:
I think that a district court... Do you really think a district court could have the authority to tell Congress to do that?

[00:30:32] Speaker 05:
No, I think a district court could tell the Treasury that it must make whatever payments are outstanding on public debt.

[00:30:40] Speaker 04:
Isn't that already the law?

[00:30:43] Speaker 05:
That is our view that that's the law, but that's not Treasury's view, and that's why we brought this, why Mr. Williams brought this action.

[00:30:49] Speaker 04:
Well, when did Treasury say they were not legally obligated to make payments?

[00:30:52] Speaker 05:
Treasury has not said they were not legally obligated, but they've said they might not be able to, and the complaint... Right, right, right.

[00:30:57] Speaker 04:
That's two different things.

[00:31:00] Speaker 04:
Well, Congress is... Nobody is saying that it isn't the law that that payer did.

[00:31:05] Speaker 04:
that if you had somebody saying that, you might have something to work on, but that's not the position that I understand any branch of government to be taking.

[00:31:13] Speaker 05:
The position is that they may not pay the debts.

[00:31:16] Speaker 04:
The position is they may not be able to.

[00:31:18] Speaker 04:
And if that doesn't mean that they're not legally obligated to, we can't change their ability.

[00:31:24] Speaker 04:
If you're looking for a remedy from the court, we can't raise money.

[00:31:28] Speaker 05:
Respectfully, I would disagree that the only reason they would not be able to is the presence of this statute and how it's being enforced by the Treasury Department.

[00:31:37] Speaker 04:
And I just want to close... Do you think they can walk out on the lawn of the Capitol and pick leaves off trees and they turn into money and they can pay if they don't know?

[00:31:43] Speaker 05:
No, they can do what the Treasury always does to pay the public debt, which is to borrow more money to turn it over and pay the outstanding debt.

[00:31:51] Speaker 05:
And I do just want to close on the Rule 15 point because I think as this argument has shown, there are a lot of different issues and the District Court's refusal to provide any reasons at all why it would not allow amendment

[00:32:02] Speaker 05:
is an error and an abuse of discretion.

[00:32:04] Speaker 05:
And had the district court, for example, said there's not enough detail in the complaint to be able to back up what this diminution in value is, that is something that could easily have been cured in the district court.

[00:32:15] Speaker 05:
Mr. Williams could have amended to mention which specific securities he owned, how they declined in value.

[00:32:20] Speaker 05:
And that's just an example of the type of reason why in Fulman and in each of this court's decisions, there has been a requirement that district court explain.

[00:32:28] Speaker 05:
Thank you, Your Honors.

[00:32:29] Speaker 03:
Thank you very much.

[00:32:29] Speaker 03:
The case is submitted.

[00:32:32] Speaker 03:
Call in his case please.