Legal News for Mon 5/13 - Cohen's Testimony Against Trump, Fifth Circuit Review of Nasdaq DEI Rules, Menendez Corruption Trial and TX Judge Pauses CFPB Late Fee Cap

Minimum Competence

This Day in Legal History: Cutting Funding to Segregated Schools

On May 13, 1966, a significant moment in the enforcement of the Civil Rights Act of 1964 unfolded, marking a pivotal step in the U.S. government's commitment to desegregation in education. This action targeted twelve segregated Southern school districts, which were found to be in violation of the federal desegregation guidelines established by the Act. The government's response was stern and decisive: it withheld federal education funds from these districts, a move that signaled a new level of federal intervention in the realm of civil rights.

The 1964 Civil Rights Act, signed into law by President Lyndon B. Johnson, was a landmark piece of legislation aimed at ending segregation in public places and banning employment discrimination on the basis of race, color, religion, sex, or national origin. However, its implementation, particularly in deeply segregated areas of the South, was met with resistance. Prior to 1966, enforcement mechanisms were largely untested in the realm of education, which remained a battleground of racial inequality.

The decision to withhold funds from the non-compliant school districts was not just a punitive measure; it was also a clear message to other districts that the federal government was serious about enforcing its laws. This move highlighted the potential financial repercussions of non-compliance with federal guidelines, adding a tangible consequence to what had often been merely a moral or ideological dispute.

The impact of this action was significant. It prompted many school districts across the South to reconsider their positions on segregation in order to meet federal requirements and regain access to crucial funding. The withholding of funds served as a catalyst for change in numerous communities, pushing them towards integration as stipulated by federal law.

This event is notable not only for its immediate effects but also for setting a precedent in the enforcement of civil rights laws through financial leverage. It exemplified a strategy that would be used in various forms over the subsequent decades to ensure compliance with federal standards, thus shaping the landscape of American education and advancing the cause of civil rights.

Michael Cohen, the former lawyer and executive for Donald Trump, is set to testify against the former U.S. president in a trial concerning a hush money payment. This payment was allegedly made to silence porn star Stormy Daniels, who claims she had a sexual encounter with Trump in 2006. The trial, which started on April 15 in Manhattan, revolves around a $130,000 payment made to Daniels before the 2016 presidential election. Prosecutors argue that Trump misrepresented these reimbursement payments as legal expenses in his company's books, leading to 34 felony charges, with potential imprisonment of up to four years.

Trump, who denies the allegations and the encounter with Daniels, has pleaded not guilty, asserting the case is politically motivated. The case is further complicated by Cohen's history of legal troubles, including a 2018 guilty plea for violating federal campaign finance laws related to the same payment. His credibility is a major focus, as Trump's defense paints Cohen as a liar who acted independently.

The trial also features Trump's vocal criticisms of Manhattan District Attorney Alvin Bragg and issues surrounding a gag order Trump violated, resulting in fines. This case is one of several legal battles Trump faces, including charges related to the 2020 presidential election and mishandling classified documents, though it is the only one scheduled for trial before the upcoming election.

Aggrieved former lawyer Michael Cohen to testify against Trump at hush money trial | Reuters

The Fifth Circuit Court of Appeals is set to revisit the legality of Nasdaq's board diversity rules, which were previously upheld by a panel of three Democratic-appointed judges. These rules, endorsed by the Securities and Exchange Commission (SEC), mandate that publicly listed companies on Nasdaq report on their board's diversity and include diverse directors, or explain the absence thereof. The full court, which leans conservative and is majority Republican-appointed, will hear arguments in a challenge initiated by conservative groups, the Alliance for Fair Board Recruitment and National Center for Public Policy Research.

These groups argue that the SEC overstepped its authority by approving these regulations, a stance that might resonate with the current court's skepticism towards regulatory agency actions. This case represents a significant test of Nasdaq's regulations that aim to enhance racial and gender diversity on company boards, requiring companies to have at least one woman and one minority or LGBTQ member on their boards, with an obligation to annually report the gender and racial composition of their boards.

The SEC and Nasdaq defend the rules as a response to investor demand for more board diversity information, asserting that these disclosures align with federal securities law. The case also touches on broader legal and societal issues, including affirmative action, as indicated by the recent Supreme Court decision against Harvard University's admissions practices, which may be considered during the court's deliberations.

Nasdaq Board Diversity Rules Face Test Before Full Fifth Circuit

The corruption trial of U.S. Senator Robert Menendez is set to begin with jury selection on Monday in Manhattan federal court. Menendez, along with his wife Nadine and two New Jersey businessmen, faces charges in a bribery conspiracy case. The allegations involve accepting bribes, including cash, gold bars, and a luxury car, in return for political favors benefiting Egypt and Qatar. This trial, which could last between five to eight weeks, comes at a critical time as Menendez, deeply unpopular in recent polls, seeks reelection in November as an independent.

This is not Menendez's first encounter with legal troubles; a previous trial in 2017 ended in a mistrial concerning different corruption charges. The current charges span from 2018 to 2023 and include obstruction of justice. Nadine Menendez will be tried separately in July due to a serious medical condition. Documents suggest that Robert Menendez might testify, potentially implicating his wife to exonerate himself.

The outcome of this trial could significantly impact the control of the Senate, where Democrats currently hold a slight majority. The senator's political future is uncertain, with many calling for his resignation and his approval ratings plummeting among New Jersey voters.

US Senator Robert Menendez's corruption trial to get underway | Reuters

Bob Menendez Bribe Trial Over Gold Bars, Cash Begins in New York

A Texas judge has issued a preliminary injunction to pause the implementation of a Consumer Financial Protection Bureau (CFPB) rule that would cap credit card late fees at $8. This rule, which was supported by the CFPB and was set to significantly reduce late fee revenue for banks, has been halted due to concerns over the constitutionality of the CFPB’s funding, as previously determined by the Fifth Circuit. The decision by Judge Mark T. Pittman affects several major banks and could have slashed their fee profits considerably.

The halted rule was designed to reduce the financial burden on consumers, potentially saving them an estimated $10 billion annually in late fees. However, banks have argued that the cap would force them to compensate by raising interest rates and other fees. The case has involved considerable legal maneuvering, including a reversal of a decision to transfer the case out of Texas and disagreements over the pace of the court’s proceedings.

The injunction reflects ongoing legal challenges against the CFPB’s authority and the broader conflict over regulatory power and economic policy in the financial sector. The Supreme Court is expected to make a ruling soon on related issues involving the CFPB's funding and authority. Meanwhile, banks and credit card issuers are likely to maintain higher late fee charges until a final decision is reached.

CFPB’s $8 Credit Card Late Fee Cap Paused by Texas Judge (1)

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