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Justice Limps Along As Civil Matters Get Shelved During Shutdown

Jan. 10, 2019, 11:30 AM

The Justice Department’s civil enforcement efforts are trudging along during the partial government shutdown, with more than half of the staff in some units furloughed.

The department is still pursuing civil cases that could jeopardize life or property, but is seeking delays in less timely matters, including lawsuits that involve hundreds of millions of dollars. Antitrust reviews of major mergers already under way, such as T-Mobile US Inc.’s $26.5 billion deal with Sprint Corp., will continue but newer deals will likely get shelved until the DOJ is fully back. Some deals could potentially close without reviews if antitrust authorities can’t move quickly enough.

A continued shutdown could seriously hamper some of the civil division’s broad and crucial mandates that range from ensuring healthy market competition and weeding out Medicare fraud to defending the U.S. in lawsuits and recouping money for the Treasury. The effect could then spill over into the department’s criminal division and federal courts, a scenario that could jeopardize law enforcement nationwide.

The civil division is operating with just 49 percent of its staff, or 538 attorneys and 135 others, according to its 2019 shutdown plan that bans attorneys from working except in emergencies. The division is one of at least 13 DOJ “components” staffed at less than 50 percent since the shutdown began 18 days ago, according to the plan.

The antitrust division has furloughed 60 percent of employees. Support staff throughout the DOJ also has been pared down.

DOJ attorneys have already cited the shutdown in convincing the U.S. Court of Federal Claims Jan. 7 to stay proceedings in a case involving a $151 million food supply contract award. They also asked the court to extend all current deadlines for the parties “commensurate with the duration” of the shutdown.

“There are simply fewer people to do the work that needs to be done,” said Andrea Murino, a former DOJ antitrust attorney and partner at Goodwin Procter LLP.

Paused Cases

The impact of the shutdown is particularly acute in the civil division, said Laura Perkins, a partner at Hughes Hubbard & Reed LLP who worked at the DOJ during the 16-day government shutdown in 2013.

Civil litigators are asking courts to pause active cases where a delay wouldn’t jeopardize life or property. A federal court, citing the shutdown, recently stayed a case alleging United Biologics LLC billed Medicare for unnecessary allergy treatments. A DOJ lawsuit accusing Quicken Loans Inc. of ignoring federal housing rules and improperly endorsing residential mortgage loans was also delayed. Quicken Loans denies all allegations.

A judge also granted a stay in a case, involving DOJ attorneys, that challenged a regulation that lengthened the amount of time a person could use a short-term health insurance plan. The government’s request to delay another case challenging the Trump administration’s expansion of a type of small business health plan, known as association health plans, was denied.

In past shutdowns, “basically the entire civil division of a US attorney’s office or within the DOJ” were furloughed, said Derek Cohen, a partner at Goodwin Procter LLP and former deputy chief of the criminal division’s fraud section. But the division may keep more workers this time around if courts refuse to stay civil cases, meaning the attorneys responsible for them could remain in action.

The DOJ’s Office of Public Affairs didn’t respond to a request for comment on the shutdown.

Slower Reviews

The department has no plans for now to stop antitrust reviews of major mergers already underway, such as T-Mobile-Sprint. But the reviews will likely slow down due to the staffing shortage, Murino said.

Federal antitrust regulators will also have to ponder what they can do on new merger agreements, such as Bristol-Myers Squibb Co.'s Jan. 3 announcement to plans to acquire Celgene Co.

The DOJ and the Federal Trade Commission, which split antitrust review duties, will continue to accept pre-merger notification filings from companies during the shutdown. Such filings are required by law under the Hart Scott Rodino Act (HSR).

Once notified, the DOJ and FTC have only 30 days to determine if the merger could be anti-competitive and request more information from companies. If neither the FTC nor the DOJ issue a second request after 30 days, the merging parties can close their transaction. Despite the shutdown, the government is still held to the 30-day rule.

The DOJ and FTC have kept up with HSR filings during past shutdowns. But it could eventually become untenable especially if the number of deals continues to grow, said Andrew Ewalt, a former DOJ antitrust division lawyer and now partner at Freshfields Bruckhaus Deringer LLP. “Hopefully it doesn’t come to that,” he added.

National Security Matter

At least for now, the shutdown’s effect on the criminal division is likely minimal, attorneys say. But that, too, could change if the federal courts system runs out of money, attorneys and former DOJ officials told Bloomberg Law.

According to the contingency plan, 80 percent of the division’s roughly 955 employees are exempt from furlough, more than 500 of whom are attorneys. Perkins, a former assistant chief of the fraud section’s foreign bribery unit, said her day-to-day obligations didn’t change in previous shutdowns. “The work went on as normal,” she said. “It didn’t affect criminal cases in any way.”

The U.S. Courts Administrative Office said in a memo that it’s “working toward the goal” of sustaining paid operations through Jan. 18.

If the courts can’t continue operating, grand juries may not be able to meet and indictments can’t be obtained, Goodwin Procter’s Cohen said.

“As more time goes on, obviously there is going to be a focus on cases that are already charged and making sure that those are prosecuted,” he said. “There’s always decisions being made with how to use limited resources at the DOJ, and if you limit them even more, then the natural offshoot of that is that we’re going to be less safe.”

“That’s a very serious matter,” he added. It’s “a matter of national security. You would literally be unable to charge people.”

—With assistance from Daniel Seiden and Madison Alder

To contact the reporter on this story: Jacob Rund in Washington at jrund@bloomberglaw.com; Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Roger Yu at ryu@bloomberglaw.com; Seth Stern at sstern@bloomberglaw.com