Commercial Litigation Update

In the wake of this country’s longest federal shutdown, federal courts were facing unprecedented decision-making whether to stay civil proceedings implicating federal employees and agencies.

The Anti-Deficiency Act prohibits federal agencies from spending beyond their allotted funding and simultaneously restricts federal employees from working on a volunteer basis. The Act provides, in relevant part:

An officer or employee of the United States Government or of the District of Columbia government may not accept voluntary services for either government or employ personal services exceeding that authorized by law except for emergencies involving the safety of human life or the protection of property.

31 U.S.C. § 1342 (emphasis added).

During lapses in federal funding, voluntary services are only authorized in very limited circumstances, but the parameters of the “safety of human life” or “protection of property” exceptions have not been uniformly defined nor applied across the courts.

On September 6, 2019, the U.S. District Court for the Northern District of California preliminarily approved a settlement in Harvey v. Morgan Stanley Smith Barney LLC. The significance of the result is two-fold. First, substantively, it is a reminder to financial services firms of potential liability under California labor law when advisors are required to pay for business expenses. Second, procedurally, the court’s approval of the settlement is edifying on the subject of parallel class actions.

In the Harvey case, plaintiffs challenged Morgan Stanley Smith Barney’s ...