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COAL CASE MAY SAP FTC’S MERGER POWER The Federal Trade Commission’s failure to stop a coal-mining merger could have broad ramifications for the U.S. government’s ability to block anti-competitive deals in scores of industries. Antitrust lawyers say a court ruling issued Aug. 16 in the Arch Coal Co.’s $384 million acquisition of the Triton Coal Co. raises questions about when regulators may block a merger. It also calls into doubt whether the Bush administration can successfully revive a legal theory on competition, called coordinated interaction, that top antitrust officials say is key in merger enforcement. “This is an amazing decision for the defense bar,” says Marimichael Skubel, a partner at the D.C. office of Kirkland & Ellis. In his ruling, Judge John Bates of the U.S. District Court for the District of Columbia attacked the FTC’s most potent weapon in merger challenges — its ability to obtain a preliminary injunction to block a deal until it can challenge the transaction before an administrative law judge. The courts historically have required the FTC to meet a very low burden of proof to obtain an injunction. The judge also rejected the idea of coordinated interaction, which holds that a merger is illegal if the resulting players in a market can coordinate on pricing or output. Experts say that Bates set a very high bar for the FTC to prove coordinated-effects cases. Under the judge’s interpretation, anything less than outright evidence of coordination is insufficient. David Balto, a partner at the D.C. office of Robins, Kaplan, Miller & Ciresi, says the court’s decision essentially guts the FTC’s main enforcement weapon for policing industries where coordination is the primary worry. These include the oil patch, hospital, and raw materials sectors. Not everyone, however, is convinced that the ruling will have a wide impact. David Meyer, an antitrust partner at D.C.’s Covington & Burling, says that while the decision is noteworthy, its relevance in other cases could be limited because it was a “factually intensive” ruling. An FTC spokesman declined to comment on the case. But the agency last week indicated that Bates would not be the last word on the deal. It filed an emergency motion with the federal appellate court seeking to block the merger pending appeal. Lawyers were split on whether the FTC should have appealed. One camp argued Bates’ decision is so damaging that the FTC must seek to overturn it. The other camp says the risk of the federal appeals court siding with Bates is too great. These lawyers say the better alternative is to forgo an appeal and continue with the administrative challenge to the merger. — Jaret Seiberg, The Daily Deal NO SALE A California company pleaded guilty last week to selling military aircraft and missile parts to China while knowing some of those materials would be shipped to Iran. At an Aug. 17 hearing before Senior Judge John Garrett Penn of the U.S. District Court for the District of Columbia, Arthur Hale, president of Interaero Inc., of Westlake Village, Calif., admitted his company broke federal export laws when it sold a Chinese firm parts for both U.S. fighter planes and Hawk missiles. D.C. Assistant U.S. Attorney Wendy Wysong said in court that Hale knew some of those parts would eventually be sent to Iran. The six deals, made during 2000 and 2001, totaled about $40,000, the government says. The Chinese contacts Interaero thought it was dealing with were actually undercover federal agents, who intercepted the parts in China. Under the plea agreement, Interaero will be fined $500,000 and receive five years’ corporate probation. Neither Hale nor any other Interaero employee was prosecuted. Robert Bittman of White & Case, who represents Interaero, says, “The company has acknowledged its mistake and has taken steps to ensure it is not repeated.” — Tom Schoenberg ON CALL When New Jersey Gov. James McGreevey was first alerted on July 23 that he might be the target of a sexual harassment suit, one of the first calls made by McGreevey’s camp was to William Lawler III, a partner in the D.C. office of Vinson & Elkins. Lawler has been a frequent train traveler to New Jersey ever since, representing the governor as the scandal snowballed and finally culminated in McGreevey’s Aug. 12 announcement that he would resign in November. “We’re trying to get our arms around the situation,” says Lawler. Golan Cipel, the former McGreevey aide who threatened the suit, has not yet filed, but if he does, Lawler says, “We will vigorously defend against it.” Lawler represented McGreevey earlier in the year when a grand jury was looking into possible campaign finance violations. — Tony Mauro FRESH FIELDING A federal judge in Miami has appointed D.C. attorney Fred Fielding of Wiley Rein & Fielding to serve as mediator in the controversial Hungarian Gold Train case. The class action filed in 2001 by Hungarian Holocaust survivors and their heirs alleges that the U.S. Army illegally sold or misappropriated gold, silver, jewels, and other luxury items stolen by the Nazis during World War II. The goods were put on a train that was later intercepted by the American army. Instead of returning the items, which could be worth between $50 million and $120 million, military officers requisitioned some of them. Other items were sold at auction, with the proceeds benefiting the United Nations refugee assistance program. Some of the items disappeared. The plaintiffs are seeking $10,000 per person. Fielding, who began the mediation when his service on the Sept. 11 Commission ended, says that lawyers for the government and the plaintiffs have met on two occasions and the mediation is ongoing. “A mediator is always optimistic,” he says, “as long as the parties are talking.” — Bethany Broida GAGGING GANSLER The D.C. Board on Professional Responsibility has found that Montgomery County, Md., State’s Attorney Douglas Gansler violated D.C. Bar ethics rules by making pretrial comments to the media about three separate murder cases nearly four years ago. Gansler was publicly reprimanded by the Court of Appeals of Maryland last year after it concluded that Gansler’s comments about specific evidence in the cases may have unfairly prejudiced the defendants. The D.C. board — noting that the matter is the first of its kind in the District — decided last month that Gansler’s conduct also violated D.C. rules and recommended public censure. Gansler, a member of the D.C. Bar and a former prosecutor in the District, has denied any wrongdoing, claiming he was explaining evidence that was already in the public record. “I have a moral, ethical, and legal responsibility to do just that — to inform the public about what’s going on,” Gansler says. The D.C. Court of Appeals will have the final say on the matter. — Tom Schoenberg RESIDENT ROADBLOCK A national class action on behalf of medical residents against teaching hospitals and medical colleges was dismissed Aug. 13. And the defendants have Congress to thank for it. A pension bill passed in April included a rider saying that certain antitrust laws do not apply to the program that matches residents with teaching hospitals. The suit, filed in the U.S. District Court for the District of Columbia, argued that the program does not allow graduates to negotiate their employment terms, artificially keeping hours long and wages low. In dismissing the case, Judge Paul Friedman wrote: “Plaintiffs are understandably frustrated. They won a significant victory in court; Congress now has snatched it away.” But he rejected plaintiffs’ claims that the exemption was unconstitutional and did not apply. Covington & Burling lawyers James Atwood, Gregg Levy, John Hall, and Eric Holder Jr. represented the defendants, including George Washington University Hospital. Plaintiffs’ counsel Sherman Marek says that he is considering an appeal and will “continue legal action for fair wages and safe work hours for medical residents.” — Lily Henning LEAPS OF FAITH President George W. Bush has broadly implemented his faith-based initiatives, and he did not need Congress or the courts to do it, says a report released last week by the Rockefeller Institute’s Roundtable on Religion and Social Welfare Policy. In three and a half years, the president wielded his executive power to expand opportunities for faith-based organizations, not only by creating a White House office to promote the cause but also by installing, for the first time, similar offices in numerous federal agencies, including the departments of Justice, Labor, Education, and Health and Human Services, says Richard Nathan, the institute’s director. “That’s distinctive, the way this [executive] power has been used,” he says. The administration also promoted its faith-based goals through agency rule changes and “managerial realignment in federal agencies,” the report says. — Christine Hines

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