Law firms fear business will slow because of U.S. government shutdown

NEW YORK Wed Oct 2, 2013 6:50pm EDT

John Zangas, who identified himself as a federal employee, protests against the current government shutdown at the U.S. Capitol in Washington, October 2, 2013. REUTERS/Jonathan Ernst

John Zangas, who identified himself as a federal employee, protests against the current government shutdown at the U.S. Capitol in Washington, October 2, 2013.

Credit: Reuters/Jonathan Ernst

NEW YORK (Reuters) - Lawyers dependant on regulatory work fear the government shutdown starting Tuesday could cause a drop-off in billable hours in the final quarter of 2013, legal experts and lawyers said.

On Wednesday already some law firms had seen a slowdown in work and had trouble reaching the Federal Trade Commission, the Department of Justice and the U.S. Government Accountability Office, among other agencies.

"We're not going to be receiving subpoenas over the next couple weeks," said Angela Styles, co-chair of the government contracts practice at Washington law firm Crowell & Moring, "and there aren't going to be Inspector General investigations."

She said she has been telling some clients, "can't do much right now."

The impact on law firms of the shutdown would depend on how long it lasted, according to lawyers.

"The longer it goes, the more problematic it will be," said George Paul, an antitrust partner at law firm White & Case.

The types of law expected to be affected by the shutdown include mergers and acquisitions, antitrust, and government investigations and contracts, lawyers said.

Aside from Crowell & Moring and White & Case, other big law firms that regularly work with federal government agencies include Akin Gump Strauss Hauer & Feld; King & Spalding; Patton Boggs; Covington & Burling; Skadden, Arps, Slate Meagher & Flom; and Kirkland & Ellis.

At the Securities and Exchange Commission, which has remained open for business, work continues on investigations and applications.

Paul said, however, there is expected to be a slowdown in regulatory negotiations with the Federal Trade Commission and Department of Justice over the review of pending mergers.

"It could hit some revenue in 2013, but I think it will be recovered in 2014," he said.

Paul didn't expect the government shutdown would kill any pending mergers his firm is working on, but noted that the government's clearance of pending transactions could be postponed so that deals don't close until 2014 instead of late 2013.

That, he said, could delay lawyers' payout for legal fees.

IMPASSE

Other lawyers downplayed the business significance of a delay in civil litigation involving government lawyers.

"So much of the work goes on outside of the courtroom that the cases will be proceeding," said Richard Taffet, a litigator with Bingham McCutchen.

But that could change, he said, if there is a continued impasse in Congress and the courts eventually need to close.

Carter Phillips, chair of Sidley Austin, said the furloughs in the Justice Department have given private defense lawyers an advantage in some litigation because government lawyers are now incapable of working on cases.

Styles, at Crowell & Moring, said that in her own practice she has seen a slowing down in contracts disputes between contractors and the government because the venue through which companies file objections to contracts, the U.S. Government Accountability Office, is shut down.

Styles said that her firm has reacted to the slowdown by seeking to keep billable hours up by doing work in the firm's other practices like ongoing government investigations. But even that work depends on the amount of government involvement required, she said.

Jeff Grossman, senior director of banking for Wells Fargo Private Bank's Legal Specialty Group, said in a statement that the government shutdown "poses downside risk" to reaching the level of revenue growth Wells Fargo had projected law firms would see in 2013.

Earlier this year, Wells Fargo and Citibank released numerous reports saying that law firms have had a particularly tough go in 2013 with lackluster demand.

(Reporting by Casey Sullivan; Editing by Ted Botha)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.