Legal business in Washington and beyond took a hit on the first day of the federal government shutdown, with more than 1,000 Department of Justice lawyers across the country home without pay.
Government lawyers sought Tuesday to put hundreds—if not thousands—of civil cases on hold, while regulatory agencies went dark and one-third of the employees of the District of Columbia’s federally funded local court system were furloughed.
Attorney General Eric Holder called the shutdown, the first in nearly 18 years, “unnecessary and harmful,” in an email to DOJ employees. Lawyers in the Civil Division—DOJ’s largest litigating component—bore the brunt of furloughs, while criminal litigation continued without interruption.
As for other agencies, a handful with funding quirks such as the U.S. Securities and Exchange Commission and the U.S. Patent and Trademark Office are open for business as usual (at least for now), but others were staffed only by essential workers dealing with “emergencies involving the safety of human life and the protection or property,” a provided in the Antideficiency Act.
For example, activities at the Commodity Futures Trading Commission, the U.S. Equal Employment Opportunity Commission and the International Trade Commission were at a near stand-still.
The U.S. Supreme Court will “conduct its normal operations” through Friday, but it is not immediately clear what would happen after that if Congress does not fund the government. Oral arguments for the term are scheduled to start Monday. “Further notice will be provided in the event a lapse of appropriations continues beyond October 4,” a note on the Supreme Court’s website said.
The federal courts have enough reserve money to run as normal for two business weeks before shutting down all but essential work, U.S. District Judge John Bates, the administrative office’s director, wrote in a memo to the federal court system. Circuit courts around the country issued statements and orders conveying the same information.
Government lawyers moved to extend court deadlines in civil cases across the country, with mixed results.
Chief Judge Loretta Preska of U.S. District Court for the Southern District of New York agreed to a request from Sara Shudofsky, chief of the Civil Division in the U.S. Attorney’s Office, to stay all civil cases in which the government has appeared and to toll all court deadlines.
In a letter to the court, Shudofsky said the shutdown imposed “severe constraints” and that “as a result of the funding lapse, almost all of the Assistant U.S. Attorneys and staff members in the Civil Division of this office have been furloughed.” Among the exceptions: the trial team in U.S. v. Countrywide Financial Corp. In that case, the government is pursuing a False Claims Act case against Bank of America Corp. for alleged fraud on Fannie Mae and Freddie Mac.
Preska agreed to stay all of the court’s government-related civil cases—other than civil forfeiture matters—“until the business day after the President signs into law a budget appropriation that restores Department of Justice funding.”
However, a bid by DOJ lawyers to stay another major case—a challenge to the $11 billion merger of American Airlines and US Airways slated for trial on November 25 in U.S. District for the District of Columbia—was promptly rebuffed. U.S. District Judge Colleen Kollar-Kotelly ruled on Tuesday that a stay “would undermine this schedule and delay the necessary speedy disposition of this matter. It is essential that the Department of Justice attorneys continue to litigate this case.”
In such instances, the government attorneys involved would be exempted from furloughs, according to Davis Polk & Wardwell partner Jon Leibowitz, who was chairman of the Federal Trade Commission from 2009 until 2013. The litigation “will continue with a small staff to work through it,” he said during an American Bar Association conference call about the shutdown.
Sharis Pozen, former acting head of the Antitrust Division who joined Skadden, Arps, Slate, Meagher & Flom as a partner in July 2012, added that while DOJ lawyers will “do the best job they can under difficult circumstances,” they’ll be at a disadvantage because they’ll be without support staff. “It’s a lot to do on your own without support,” she said.
Law firm leaders were still getting a handle on what the shutdown would mean for clients. “We’re reaching out to agencies and clients are reaching out to us. We’re sorting through all of that and monitoring it closely,” Wiley Rein managing partner Peter Shields said.
Gregory Shumaker, partner-in-charge of Jones Day’s Washington office, said in an email that the key would be how long the shutdown lasts. “If this drags on (and becomes ‘long-term’), it will of course start to become a more significant consideration for our clients. But I suspect many of them…feel like this is very much a short-term development and therefore it will have little meaningful impact on their operations or demand for our services.”
The shutdown also presents a challenge for lobbyists. “What it does make harder is for people to understand how you can navigate their issue through a minefield like this and get them to their objective,” said Kevin O’Neill, deputy chairman of Patton Boggs’ public policy group. The response to clients, he said, is “getting expectations set, and explaining why getting involved now will benefit them in the long run.”
That includes a shift from legislative work to regulatory work, as the Obama administration tries to move policies through the regulatory process and avoid the blocked legislative path, O’Neill said.
For the time being, though, most regulatory agencies were shuttered. At the Commodity Futures Trading Commission, for example, only a few activities, such as reviewing certain financial filings seen as necessary for the protection of property were being carried out.
Other matters pending before the commission were on hold until the agency reopens. “It would be contrary to the [Commodity Exchange Act], and to the public interest, if these review and approval time limits continued to run while the Commission is unable to conduct routine business,” the agency’s shutdown plan said.
At the U.S. Equal Opportunity Commission, by contrast, the clock kept ticking. There are strict time limits for filing charges of discrimination with the agency, but “[t]hese time limits may not be extended because of the shut-down,” according to the agency. Also, EEOC litigation will “be suspended unless needed on an emergency basis or if a continuance has not been granted by the court.”
The International Trade Commission also essentially closed. The agency’s website (including EDIS, its database containing all records of past and pending intellectual property cases) was offline.
ITC lawyers filed a motion with the U.S. Court of Appeals for the Federal Circuit on September 27 asking to delay oral argument in a patent dispute pitting Apple Inc. and the ITC against Motorola Mobility.
ITC lawyers “will not be authorized to represent the Commission should a shutdown occur. A shutdown would affect not only counsel’s ability to adequately prepare for the argument, but could also possibly impact counsel’s ability to attend the oral argument should the shutdown extend through October 11,2013,” ITC lawyer Megan Valentine wrote. Motorola counsel from Quinn Emanuel Urquhart & Sullivan did not oppose the motion.
However, the U.S. Securities and Exchange Commission was unaffected by the shutdown, at least for now. “The SEC is staying open because we have carryover funds available,” agency spokesman John Nester said in an email. “Unlike most other agencies, our appropriations language provides that our funds ‘remain available until expended.’ It is not uncommon for us to have carryover balances at the end of a fiscal year, and we have determined that our carryover balances are sufficient to allow us to remain open for a few weeks during the lapse of appropriations.”
The Consumer Financial Protection Bureau was also unaffected because it’s funded by fees from the Federal Reserve and is not subject to the appropriations process.
Mike Scarcella, Todd Ruger, Matt Huisman and Zoe Tillman contributed to this report.