The Magazine

Thomas Perez Makes a Deal

How Obama’s Labor nominee made a Supreme Court case disappear

May 27, 2013, Vol. 18, No. 35 • By TERRY EASTLAND
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United States ex rel. Newell v. City of St. Paul was the name of Newell’s case. By their nature, false claims cases seek to advance the interests of the United States. But the United States​—​represented by the Justice Department​—​may intervene in such cases. Justice joins no more than 25 percent of whistleblower cases, but it wins most of those it joins, and most of those it doesn’t join fail to proceed. Justice, you could say, has the job of screening out cases with deficiencies that render them unlikely to succeed, which happens to be most of them. 

Looking into the Newell case, Perez found that the three governmental entities involved in deciding whether to intervene were close to formal agreement in favor of joining the case. They reached that agreement on November 22, the day before Perez and Lillehaug first spoke. HUD, the party allegedly defrauded, wanted to intervene. So did the Civil Fraud Section in the Justice Department’s Civil Division, which is the law enforcement arm for the client agency in the case, which was HUD. And so did the U.S. Attorney’s Office in Minneapolis, which represents the government in Minnesota’s federal district court. In a memorandum recommending that the government intervene, the lawyer working the case in the U.S. Attorney’s Office wrote that HUD had “determined .  .  . the City was out of compliance with Section 3” and that “it did not appear to be a particularly close call.” 

If the United States had intervened in Newell, the “potential solution” Perez and Lillehaug had discussed would not have been possible, and Magner would not have been withdrawn from the Court’s docket. As the joint staff report shows, Perez, immediately after speaking with Lillehaug on November 23, began an arduous effort to turn around those reviewing Newell at HUD, the Civil Division, and the U.S. Attorney’s Office in Minnesota. By early January 2012 all three were in agreement: The Civil Division would decline to intervene in Newell as well as in another False Claims Act suit filed against St. Paul, United States ex rel. Ellis v. St. Paul

Meanwhile, also in early January, with oral argument in Magner scheduled for the last day of February, Perez stepped up his effort to get St. Paul to withdraw the case from the Supreme Court. According to Lillehaug, Perez presented a “roadmap” for how to get the city “to yes.” But on February 3, with “yes” still not reached, Perez flew to St. Paul to meet with the mayor and other city officials. Perez again “lobbied the mayor on the importance of disparate impact,” according to the joint staff report, while reiterating the government’s willingness not to intervene in the Newell and Ellis cases if Magner were withdrawn. City officials caucused privately and decided to accept the arrangement.

On February 9, the U.S. attorney for Minnesota filed a notice in court that the United States would not intervene in Newell. The similar filing in Ellis would come later. For now there was one thing left to be done. The next day, after three months in which Perez had relentlessly pursued his objective, St. Paul withdrew its petition in the case. Disparate impact had been saved, at least for now.

A press release from the city announcing St. Paul’s request for a dismissal of Magner focused on disparate impact: 

While Saint Paul likely would have won in the .  .  . Supreme Court, a victory could substantially undermine important civil rights enforcement throughout the nation. .  .  . The City of Saint Paul, national civil rights organizations, and legal scholars believe that, if Saint Paul prevails in the Supreme Court, such a result could completely eliminate ‘disparate impact’ civil rights enforcement, including the Fair Housing Act and the Equal Credit Opportunity Act. This would undercut important and necessary civil rights cases throughout the nation. 

Just seven weeks earlier, when it filed its brief in Magner with the Court, St. Paul had taken a far different view of disparate impact in housing, stating unequivocally, “This theory finds no support in the text of the FHA.”

During his confirmation hearing on April 18, Perez was asked about his work in getting Magner dismissed. The ranking Republican on the committee, Senator Lamar Alexander, commented that there seemed to him “an extraordinary amount of wheeling and dealing outside the normal responsibilities of the assistant attorney general for civil rights.” Indeed, there was, and it took place in a Justice Department so evidently mismanaged that its senior leadership, according to the joint staff report, “was unaware of the extent to which Perez had gone to realize his goal” until well after he achieved it.

Among the questions the Magner story raises is whether Perez did anything inherently wrong in getting the case withdrawn from the Court’s docket. And the answer is no, according to Supreme Court litigators with Justice Department experience. These litigators cautioned, however, that as a prudential matter the department wouldn’t want to try doing that often, since it could fairly be seen as an effort to game the legal process. Perhaps that is why the litigators I spoke with were hard pressed to recall any similar instance.

A second question follows: Did the Justice Department do anything wrong by linking the unrelated cases of Magner and Newell in order to have Magner pulled from the Court’s docket? The department has said that it is a “unitary actor” and may act in the “best overall interests” of the United States. That is, it may link cases if it thinks doing so necessary to vindicate the compelling interests of the United States. And that, says Justice, is what happened here. It bears noting that if a Republican had been president, the Justice Department would have had a different perception of the “best overall interests” of the United States. Almost certainly it would not have sought to save disparate impact from an adverse decision by the Supreme Court, and it might well have filed a friend-of-the-court brief in support of St. Paul. With Magner and Newell not linked, the department might even have joined Newell

And a third question: Should the United States have intervened in Newell? The Justice Department has pointed to Mike Hertz, a career lawyer in the Civil Division commonly looked to for his assessment of the merits of whistle-blower cases. Hertz, says Justice, saw Newell as a weak case not worth joining. Maybe so. But notes from an early January meeting attended by Hertz (who recently passed away) attribute to him the words “Odd​—​looks like buying off St Paul.” Hertz may have been reacting to the division’s final decision memorandum on Newell, and to the last of the factors that were considered in evaluating the case. They were: “potential evidence and witnesses, litigation risks, the lack of agency support, and policy considerations, including the City’s anticipated withdrawal of Magner [emphasis added], which would aid the Department’s civil rights enforcement.” 

The Magner story is a reminder that presidential elections matter, from the Oval Office down through the departments and agencies and their subunits. Electing Barack Obama in 2008 meant four years of Thomas Perez as the government’s chief civil rights officer. And reelecting Obama in 2012 has meant the nomination of Perez as secretary of labor.

The whole business has confirmed for Republicans in the Senate, and in the House, too, the perception that Perez is a lawyer who, in the words of Senator Orrin Hatch, has “a propensity for using the legal and judicial system to further an ideological agenda.” But absent new information about Magner or other matters still being pursued by Republicans on Health, Education, Labor and Pensions, Perez’s appointment is likely to be confirmed by the Senate. The presumption of deference that the Senate historically has extended to the president’s executive-branch nominations has been so tested by the choice of Perez, however, that the committee vote on his nomination last week split along party lines: Not a single Republican voted for it. 

Out in the country, the pursuit of disparate impact,
of racial proportionalism, proceeds apace. The township of Mount Holly, New Jersey, has asked the Supreme Court to hear its appeal of a decision against the city sustaining a disparate impact claim. Here again, the validity of the theory is the issue. The Court is still weighing whether to take the case and has asked the solicitor general for his opinion on the question. The mayor of Mount Holly has publicly signaled his interest in settling the case.

Has the mayor heard from the same groups that counseled the mayor of St. Paul? And maybe also from Perez himself? Two months ago congressional investigators asked Perez and two HUD officials about the Mount Holly case. Administration lawyers told them not to answer.

Terry Eastland is publisher of The Weekly Standard.

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