Joseph F. Wayland just pulled off what no Department of Justice attorney has been able to accomplish in more than a decade -- a victory in a merger case before a federal judge. On Oct. 31, after a monthlong trial in which Wayland led the DOJ's litigation team, U.S. District Court Judge Beryl Howell permanently enjoined H&R Block Inc.'s proposed $287.5 million acquisition of upstart competitor 2nd Story Software Inc., better known as TaxAct. The companies didn't appeal her ruling and terminated their merger plans two weeks later.
Wayland, who joined the DOJ in September 2010 after a 22-year career as a litigator for Simpson Thacher & Bartlett LLP, won't have much time to savor the win. An even bigger test is rapidly approaching -- the department's case against AT&T Inc.'s $39 billion plan to acquire T-Mobile USA Inc. from Deutsche Telekom AG. That trial is scheduled to begin in February.
Wayland, 53, wasn't known for handling merger cases before arriving at the Justice Department as a deputy assistant attorney general, but he had nevertheless built an outsized reputation as a litigator in other areas, including international cartel investigations, monopoly abuse cases and other varieties of anticompetitive conduct.
He generated his biggest headlines helping lead a multiyear pro bono case that resulted in a judge's order requiring the state of New York to increase annual funding to New York City schools by roughly $5 billion, with the increase phased in over four years. Wayland and his Simpson Thacher team worked on the case for more than five years, culminating in a seven-month trial, with estimates of the value of the legal work ranging from $14 million to $20 million.
Michael Rebell, who led the Campaign for Fiscal Equity Inc., the nonprofit organization that brought the lawsuit against the state, credits Wayland for the decision. "Without Joe Wayland, we would not have won that victory," says Rebell.
Rebell reached out to Wayland after a judge in 1993 denied the state's request to dismiss the campaign's case but also ruled that New York City had no standing to participate, leaving the campaign and other advocacy groups to fight on their own.
"When we got this unexpected victory, we were a small nonprofit with two lawyers," Rebell recalls. "Now we had the prospect of huge litigation against the state of New York that would require years of discovery, examining every aspect of the state's school-funding system."
Rebell reached out to several big law firms, hoping one would take it gratis. Simpson Thacher, where Wayland was head of the pro bono committee, impressed Rebell with the amount of personnel and time the firm was willing to devote to the case -- as many as four partners and five associates at any one time ended up being assigned. Wayland signed up to be partner in charge of the case.
"We had a wonderful partnership," says Rebell. "I knew the substantive area of education law, but Joe was running the show as far as the trial was concerned."
"I've never had anybody else with whom I was so productive in discussing trial strategy and legal theories," he says. "I pushed for more radical positions, and Joe was usually more cautious. We always worked out a way to combine our approaches."
Despite Wayland's record as a tough litigator, Rebell says he has a surprisingly soft-spoken manner in the courtroom. "He keeps to himself and doesn't engage in a lot of the typical chit-chat before a day's proceedings get underway. But when things get started, he has a thorough focus on the bottom-line issues. When he's cross-examining a witness, you can see the momentum building. You could take his examinations of witnesses and use them as models in law school."
Critics of the case, including the conservative Manhattan Institute, complained that the New York schools case wasn't the David and Goliath story depicted in the press. The campaign employed an outside public-relations firm during the trial that often released testimony to the press the day before a key witness testified in order to spin the next day's coverage. After the judgment, Rebell and Wayland each asked for a few million dollars in legal fees.
The vast majority of Wayland's two decades as a lawyer was spent representing the kind of big companies he's taking on now. One of his last major cases in private practice was serving as the lead coordinating attorney for a group of large financial firms being sued for antitrust violations in the marketing of municipal derivatives. He also represented Bear Stearns Cos. and J.P. Morgan Chase & Co. in the proceeding, which is still pending in federal court in New York.
Richard Scheff, chairman of Montgomery, McCracken, Walker & Rhoads LLP, was among the attorneys Wayland worked with in the case. "He did a nice job of trying to keep the group together," he says. "In that case it was important that the group be somewhat unified. Where there were differences, he tried to work with the parties to achieve consensus."
However much Wayland has benefitted from representing the well-heeled and powerful, he has also encouraged his colleagues to carve out time in their careers for public service or to represent folks who otherwise couldn't afford the services of a top-tier law firm.
After leaving Simpson Thacher, Wayland addressed his former co-workers in a November 2010 letter published in one of the firm's in-house letters. "It is vitally important that bright, committed and talented people, like Simpson Thacher lawyers, be willing to serve," he wrote. "The problems that government must confront are complex and difficult." In the letter Wayland also noted that soon after arriving at Simpson Thacher in 1988 following a four-year stint as an Air Force lawyer, he was encouraged by the firm to develop a substantial pro bono project with Legal Services NYC-Bronx. "All of us ... have the ability to make a significant contribution to solving the problems of civil society," he wrote of his decision to join the DOJ.
His first merger trial with the department went as well as could be imagined. The trial, the DOJ's first merger case to go before a judge since losing an attempt to block Oracle Corp.'s purchase of PeopleSoft Inc. in 2004, showed an agency with renewed confidence in its ability to try cases in court.
In her ruling, Howell agreed with the DOJ's argument that do-it-yourself tax preparation software is a standalone market and not just a small portion of a larger market that also includes manual and assisted preparation. That critical finding affirmed the government's contention that the market was highly concentrated and the merger would create a duopoly.
J. Robby Robertson, the Hogan Lovells US LLP lawyer who represented H&R Block, disagrees with Howell's ruling, but credits Wayland with using his experience in nonmerger cases to assemble a well-crafted story about the harm the tax deal would have created.
"The Justice Department folks did it the way it's supposed to be done," he said during a conference call with members of the antitrust bar. "This is the first time I've seen them do this the right way, in terms of the structure of putting on a case, in many, many years," said Robertson, who had two successful runs as a litigator for the Federal Trade Commission. "I hope they continue in this direction."
Andrew Schwartzman, senior vice president and policy director of the Media Access Project, an advocacy group opposed to media and telecom consolidation, is pulling for Wayland in the DOJ's suit to stop AT&T's planned takeover of T-Mobile. Schwartzman says Wayland brings a private litigator's wealth of knowledge on how to prepare a case and use the DOJ's comparatively thin resources to their fullest, and is a positive addition in other ways as well.
"He's a snappy dresser and has a private practitioner's polish," Schwartzman says. "He doesn't look like a typical government lawyer."
In an interview, Wayland offers only praise for the courtroom skills of his DOJ team. "I'm delighted to have the privilege of working for the government and to be able to work with the extraordinary staff, which works at a very high level."
Wayland graduated from Columbia Law School in 1983 and worked at the Pentagon during his stint in the Air Force. He became a Simpson Thacher partner in 1994.
David Balto, a senior fellow at the liberal Center for American Progress, said he's encouraged by Wayland's handling of the H&R Block case. Since the Oracle case, "I've felt like a Red Sox fan," he said during the American Bar Association call. "Instead of the curse of the Bambino, it's been the curse of Judge Walker and Oracle. We went a long period of time without them bringing any cases in federal court."
"I'm glad the new enforcers at the Antitrust Division have put Oracle in its place," said Balto. "Now they have no reluctance to go to federal court." n