Shutdown sets off scramble to delay U.S. court deadlines

10/01/2013

By David Ingram and Nate Raymond

WASHINGTON, Oct 1 (Reuters) - Faced with an indefinite government shutdown, U.S. government lawyers sought delays on Tuesday in court cases across the country on subjects ranging from competition among Idaho hospitals to drone strikes abroad.

The requests to postpone trials and deadlines for written briefs had been expected after the Justice Department cautioned on Monday that non-critical civil matters would fall victim to a lack of money. Only U.S. government matters that were deemed essential were allowed to go on until Congress allocates money for the fiscal year that began on Tuesday.

Courts granted some requests and denied others on Tuesday, the first day of the partial shutdown.

Judges in Washington, D.C., and New York refused to halt big cases challenging the merger of AMR Corp's American Airlines and US Airways Group Inc, and seeking to hold Bank of America Corp liable for mortgage fraud.

"We should, out of respect, observe a moment of silence for the passing of a great institution - I mean the federal government," U.S. District Judge Jed Rakoff in Manhattan, who oversees the Bank of America trial, told jurors with a bit of sarcasm on Tuesday.

There was no immediate sign of when the political standoff that forced the shutdown would end.

Republicans in the House of Representatives had tried to tie renewal of government funding to measures undermining President Barack Obama's signature healthcare law, while the Democratic-controlled Senate repeatedly rejected those efforts. The fiscal year begins on Oct. 1.

The Federal Trade Commission, the Equal Employment Opportunity Commission, the Federal Communications Commission and the Export-Import Bank of the United States joined the Justice Department in filing motions to stay proceedings.

In docket after docket nationwide, agency lawyers summoned dire language as they told judges what they already likely knew from news reports.

"We write to notify the Court that, as a result of Congress not enacting a federal budget for this fiscal year or extending the continuing resolution previously in place, Plaintiff has ceased regular operations," wrote enforcement attorney R. Stephen Painter of the U.S. Commodity Futures Trading Commission in one letter.

Nearly all civil cases that involved the federal government in the busy U.S. District Court in Manhattan were put on hold. Judge Loretta Preska, chief of the district, said in an order that all deadlines would be extended for a time equal to the length of the shutdown.

OPEN FOR LIMITED BUSINESS

Despite the urgent appeals for delay, federal courts were themselves open and available to accommodate criminal cases and private lawsuits to which the U.S. government was not a party. The judiciary said it had reserves from prior fiscal years to last about two weeks, after which it would need to reevaluate.

The U.S. Supreme Court said it would not alter its normal operations at least until Friday. Based on past practice, oral arguments next week were expected to go ahead at the start of the high court's nine-month annual term.

A federal law known as the Anti-Deficiency Act prohibits government employees from volunteering their service when not authorized by an appropriation "except in cases of emergency involving the safety of human life or the protection of property."

Not all government suits ground to a halt.

The Manhattan U.S. Attorney's Office exempted members of the trial team in its lawsuit against Bank of America over allegedly defective mortgages sold to Fannie Mae and Freddie Mac by the bank's Countrywide unit, according to a letter that U.S. Attorney Preet Bharara's office sent to Judge Preska.

In Washington, U.S. District Judge Colleen Kollar-Kotelly went ahead with a previously scheduled hearing on the government's challenge to the proposed $11 billion merger of American Airlines and US Airways, and in a written order later declined a Justice Department request to stay the case.

MONEY AT STAKE

Kollar-Kotelly in the two-page order said the airline case was significant because of ongoing bankruptcy proceedings for American's parent AMR Corp, as well as "the amount of money at stake" in the deal.

A stay would "delay the necessary speedy disposition of this matter. It is essential that the Department of Justice attorneys continue to litigate this case," she wrote.

The companies, which call any delay a threat to their deal to create the world's biggest airline, opposed the request. A trial is scheduled to begin on Nov. 25.

Some litigants were more accommodating. The American Civil Liberties Union did not oppose a Justice Department request for a temporary halt in the ACLU's suit to find out more about U.S. drone strikes abroad. The suit was filed in 2010.

In Idaho, a closely watched bench trial in which the Federal Trade Commission seeks to block a hospital chain from buying a physicians group entered a seventh day. Early on Tuesday, FTC lawyers asked for a stay but U.S. District Judge B. Lynn Winmill had not ruled on the request by midday, a clerk said.

FTC lawyers won a delay in a separate contested merger case, one in which the commission sued to block the combination of two glass-bottle manufacturers: Ireland's Ardagh Glass and a U.S. unit of France's Saint-Gobain.

U.S. District Judge Barbara Rothstein said that although a trial is scheduled to begin in Washington, D.C., on Oct. 17, the sides would need to submit a new proposed schedule if and when the government reopens.

"The parties are encouraged to observe the original schedule as closely as possible," she wrote.



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