Minimum Competence - Daily Legal News Podcast
Minimum Competence
Fri 10/13 - Rite Aid Needs Aid, WGA Wins Restrictions on AI Usage, Judge in MT Calls TikTok Ban Paternalistic, Citi New ESG Initiative, SCOTUS May Provide Cover for Racial Gerrymandering

Fri 10/13 - Rite Aid Needs Aid, WGA Wins Restrictions on AI Usage, Judge in MT Calls TikTok Ban Paternalistic, Citi New ESG Initiative, SCOTUS May Provide Cover for Racial Gerrymandering

We have Rite Aid checking couch cushions for nickels, WGA wins AI restrictions, judge in MT doesn't like TikTok ban, Citi moves forward with ESG plan and SCOTUS gerrymandering case.

Robot checking couch cushions for coins with a gerrymandered map on the wall.

On this day in legal history, October 13, 1952 the Supreme Court denied certiorari in the appeal of the death penalty by Julius and Ethel Rosenberg–each convicted of espionage.

Julius and Ethel Rosenberg were American citizens who gained notoriety in the early 1950s for being accused of espionage during the Cold War. They were alleged to have passed atomic secrets to the Soviet Union, a charge that was particularly sensitive given the heightened tensions between the U.S. and the USSR at the time. The couple was arrested in 1950, and their trial took place in 1951. They were convicted of conspiracy to commit espionage, based largely on the testimony of Ethel's brother, David Greenglass, who was also involved but cooperated with authorities to lessen his own sentence.

The Rosenbergs were sentenced to death, a penalty that was met with a great deal of controversy both in the United States and internationally. Appeals for clemency were made, citing the lack of definitive evidence and the harshness of the death penalty for a crime that did not result in any direct loss of life. Despite these appeals, they were executed in the electric chair at Sing Sing Correctional Facility in New York on June 19, 1953. They were the first American civilians to be executed for espionage during peacetime, and their case remains a subject of debate to this day.

In the years following their execution, new evidence and perspectives have emerged that have led some to question the fairness of their trial and the severity of their sentence. Declassified documents have shown that while Julius was likely involved in some form of espionage, the evidence against Ethel was far less conclusive. Many believe that she was convicted and executed largely to exert pressure on her husband to confess, which he never did.

The Rosenberg case has been the subject of numerous books, films, and scholarly articles. It serves as a cautionary tale about the dangers of McCarthyism and the excesses of anti-communist sentiment in the United States during the Cold War. The case also raises ethical and legal questions about the use of the death penalty, especially in cases where the evidence is not clear-cut. In 2015, the Rosenbergs' co-defendant, Morton Sobell, who had also been convicted of espionage but was not executed, admitted that he and Julius had been involved in giving military secrets to the Soviets, but he maintained that Ethel was not involved. This has led to renewed calls for Ethel Rosenberg to be exonerated, although no formal steps have been taken to do so.

Rite Aid Corp. is reportedly in talks with Bank of America for a loan to support the company through a potential Chapter 11 bankruptcy process. The loan would be asset-based and secured by accounts receivables, inventory, and prescription lists. While Rite Aid is also exploring other options to manage its debt, it is soliciting potential buyers to bid for parts of the business in the event of bankruptcy. The company has over $3 billion in long-term borrowings and is considering a bankruptcy filing to restructure various debts, including opioid liabilities.

Rite Aid Seeking Asset-Based Loan to Fund Itself in Bankruptcy

The Writers Guild of America (WGA) has struck a deal with Hollywood studios that places restrictions on the use of Artificial Intelligence (AI) in script-writing. This agreement comes after a nearly five-month-long strike by the WGA and aims to address the evolving landscape of copyright law. The deal mandates that studios must disclose any AI-generated material provided to writers and cannot force writers to use AI. It also gives the WGA the right to bar the use of writers' material to train AI models.

The U.S. Copyright Office and appellate courts have stated that AI contributions to creative works are not covered by copyright protections. Therefore, studios must be cautious in how they use AI, as undisclosed AI involvement could invalidate a copyright registration, forcing the company to drop any lawsuits and re-register the work. The agreement also aims to protect writers from being replaced by AI or having their wages driven down.

The deal reflects broader concerns about AI's role in creative processes and its potential to infringe on human-created content. Legal experts note that tracking AI contributions in a complex creative process like script-writing is a new challenge. Failure to accurately track and disclose AI involvement could lead to legal complications.

The agreement is seen as a safeguard against the increasing use of AI in the creative aspects of movie production. However, the rapidly evolving nature of AI technology and the law surrounding it adds a layer of uncertainty to the deal. Legal experts believe that the agreement opens up a lot of gray areas, especially in complex works like movies, making the copyright landscape even more complicated.

Writers Guild AI Deal Pushes Studios Down New Copyright Path

A federal judge in Montana questioned the state's rationale for imposing a blanket ban on the social media platform TikTok. Judge Donald W. Molloy expressed skepticism about the state's claim that the ban was meant to protect consumer privacy, pointing out inconsistencies with how state officials publicly described the law. The judge also criticized the ban as "paternalistic," questioning why the state hadn't considered more targeted measures to regulate data access by the Chinese government. TikTok and five U.S. content creators have sued Montana, arguing that the law is overly broad and conflicts with federal statutes.

State Solicitor General Christian Corrigan argued that the primary aim of the ban was consumer privacy, not national security. However, Judge Molloy found this argument "totally inconsistent" with public statements made by state officials, who seemed more focused on "teaching China a lesson."

The ban, which is set to go into effect on January 1, 2024, would subject TikTok and app stores to daily fines of $10,000 if the platform remains available for download in Montana. This is the first such ban that TikTok has challenged in court, although it faces separate lawsuits in Indiana and Utah over content oversight and ties to China.

Attorneys representing TikTok and the content creators also argued that the ban would infringe on First Amendment rights and disrupt the livelihoods of creators who rely on the platform for income. The case continues to unfold, but the judge's initial questioning suggests skepticism about the state's arguments for the ban.

‘Paternalistic’ Montana TikTok Ban Perplexes Judge in Hearing

Citigroup has received a rare advisory opinion from the Biden administration's chief worker benefits regulator, allowing the bank to prioritize diverse asset managers for its employees' 401(k) plans. This move aims to achieve racial diversity objectives without violating federal benefits laws. The Department of Labor's Employee Benefits Security Administration (EBSA) has been under scrutiny for allegedly favoring environmental, social, and corporate governance (ESG) investing factors, but the agency claims its new rule is neutral on ESG considerations.

Citigroup's Racial Equity Program covers some or all asset management fees that diverse companies would charge its employee benefit plans. While plan fiduciaries still have the final say in choosing asset managers, Citigroup's program gives diverse service providers a competitive advantage by lowering costs. EBSA emphasized that fiduciaries must consider multiple factors in their decision-making process.

The advisory opinion distinguishes between "settlor" activities related to the formation of plans and fiduciary activities related to the management of plans under the Employee Retirement Income Security Act (ERISA). The funds used to prioritize diverse asset managers come from Citigroup's corporate assets, not from plan assets, which often include participant contributions.

The advisory opinion could face challenges, especially as diversity, equity, and inclusion metrics become more intertwined with public narratives on ESG. A Republican-controlled House Committee recently advanced a bill emphasizing that financial management should focus solely on finances, without regard for diversity factors. The advisory opinion is the first issued by EBSA in over three years, possibly due to the contentious public debate and potential litigation surrounding the issue.

Citi Blazes New ESG Trails in Boosting Diverse 401(k) Managers

The U.S. Supreme Court is considering a case that could make it more difficult to challenge racial gerrymandering. The case involves the relocation of 30,000 Black residents from South Carolina's 1st congressional district to another, a move initiated by the state's Republican-led legislature. The case is particularly significant as Democrats aim to win the 1st district in the 2024 congressional elections; Black voters predominantly support Democratic candidates. In 2019, the Supreme Court ruled that federal courts could not intervene in cases of partisan gerrymandering but left racial gerrymandering as illegal.

The Court's conservative majority appeared to lean toward the argument that the redistricting was done for partisan advantage rather than racial motives. Civil rights advocates argue that such a ruling would allow states to use political defenses to mask racial motives. A federal three-judge panel had previously blocked the map, stating it violated the U.S. Constitution's 14th and 15th Amendments by reducing the influence of Black voters.

To win a racial gerrymandering case, plaintiffs must prove that race was the primary factor in redistricting, even when a strong correlation exists between race and party affiliation. The three-judge panel had supported the plaintiffs, noting that the new map increased the share of white voters while reducing Black voters, a process they termed "bleaching."

Legal experts suggest that if the Supreme Court reverses the lower court's decision, future plaintiffs will need to separate race from party more effectively. One method could be to present an alternative map that meets the state's partisan goals without affecting the minority population. However, the Supreme Court's conservative justices seem to believe that such alternative maps are necessary, a point contested by liberal Justice Elena Kagan.

US Supreme Court may make it harder to prove racial gerrymandering | Reuters

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at