When Judge Richard Leon of the U.S. District Court for the District of Columbia issued an opinion last month green-lighting the massive merger deal between AT&T and Time Warner, he described the weekslong court fight preceding his ruling as a “Herculean task” and “epic battle.”
That battle is about to stretch even further. After weeks of waiting and speculation, the Justice Department last week filed notice to appeal Leon’s ruling to the D.C. Circuit, in hopes of resuscitating federal regulators’ first major legal challenge to a vertical merger in four decades.
How exactly the appeal will play out will be previewed in the Justice Department’s next court filings, due in August. But both sides have already beefed up their legal teams for a second act to the case. Sidley Austin partner Peter Keisler notified the D.C. Circuit Monday he would represent AT&T, while three lawyers within the DOJ antitrust department’s appeals section have entered appearances in the case: Mary Helen Wimberly, Kristen Limarzi and Adam Chandler.
Experts see a difficult task ahead for the Trump administration and DOJ antitrust chief Makan Delrahim, particularly because Leon’s ruling was so fact-driven.
But others are pushing against the conventional wisdom, arguing their appeal might find a more favorable reception at the D.C. Circuit. One antitrust lawyer, David Balto, a former policy director at the Federal Trade Commission, says it might even be a “friendly forum.”
“People should not sort of assume that the D.C. Circuit is going to rubber-stamp what happened. The D.C. Circuit is known for being the strongest court of appeals on antitrust merger law. They’ve reversed a number of cases in favor of the government in the past few years,” Balto said.
One data point that might provide optimism for Main Justice? The D.C. Circuit’s 2009 opinion in a case that dealt with Whole Foods Market’s purchase of Wild Oats, a rival organic foods grocery chain. In that case, the D.C. Circuit reversed the lower court’s ruling denying a request by the FTC to enjoin the deal. Whole Foods later settled with the FTC.
It may be a sign that the appeals court doesn’t shy away from reversing lower court opinions in antitrust law, even if they are fact-driven. “I think the court will see a lot of opportunity to articulate an area of antitrust law that’s been unclear to date, and they’ll step up to the plate,” Balto added.
The likely absence of Judge Brett Kavanaugh in a case dealing with the DOJ’s appeal might boost DOJ’s hopes for a successful appeal. He was the three-judge panel’s sole dissenter in Whole Foods.
Nonetheless, DOJ should not expect the D.C. Circuit to give it a free pass, says Fiona Schaeffer, a Milbank, Tweed, Hadley & McCloy partner who specializes in antitrust law.
“They’re not going to give undue deference to a district court opinion, but there [will have to] be a very crisp legal argument as to why the judge got it wrong,” Schaeffer said. “This can’t be a thousand stories in the naked city, literally combing through the record as to what [Leon] did and didn’t get right. It’s got to be an issue of magnitude that would have affected the outcome of the case.”
One possible wrinkle to the appeal? The fact that AT&T and Time Warner already closed their deal on June 15, just days after Leon’s ruling, a point that AT&T CEO Randall Stephenson emphasized in an interview with CNBC last week. “The merger is closed. We own Time Warner,” he said.
But Balto says that might not be as big an obstacle as one might suspect, since the telecom giant and content distributor haven’t fully consolidated their assets under one roof.
O’Melveny & Myers partner Daniel Petrocelli, who represented AT&T at trial, confirmed to the Justice Department in a letter last month that AT&T is managing Turner Networks “as part of a separate business unit, distinct from the operations of AT&T communications.”
Exactly how the DOJ’s bid will play out in court is unclear, and it could take months for a ruling to emerge. One thing that is apparent to lawyers who have followed the case: the DOJ, undaunted by the June ruling, is signaling to the business world that it will continue aggressively enforcing mergers.