Aon/Willis Towers Watson: DOJ Draws Public Interest-Minded Judge in Suit to Block Broking, Benefits Tie-Up

Published on Jun 21, 2021

DOJ’s suit to block Aon’s (AON) purchase of rival insurance broking giant Willis Towers Watson (WLTW) won a potentially sympathetic ear last week when D.C. District Court Judge Reggie Walton was assigned to oversee the case against the $30 billion merger, attorneys familiar with the judge told The Capitol Forum.

Walton is a deliberate, methodical and public interest-oriented judge, said attorneys who have worked before him. The judge runs a tight courtroom and eschews nonsense, and prioritizes thoroughness over pace in his proceedings, the attorneys added.

That deliberate approach sometimes results in Walton taking longer to rule than his colleagues. Delays in merger cases generally favor the government because the companies often struggle to hold their deal together through an extended litigation timeline.

Walton was nominated to the D.C. bench by President George W. Bush in 2001 and won unanimous Senate confirmation. Prior to his appointment, Walton gained courtroom experience as a public defender, a prosecutor and in two stints as a judge on the D.C. Superior Court. His experience shines through in his proceedings and decisions today, the attorneys said.

“He’s one of the judges who most looks at it from a public interest point of view,” one attorney said. “He’s one of the more public-spirited judges who takes the responsibility of making the right decisions for the parties and the public very seriously.”

Since his investiture, Walton has overseen several high-profile cases, including trials involving former pitcher Roger Clemens and former Vice President Dick Cheney’s Chief of Staff I. Lewis “Scooter” Libby. He also presided over a matter involving redactions from Special Counsel Robert Mueller’s report on foreign interference in the 2016 election.

The Willis Towers Watson case won’t mark Judge Walton’s first foray into merger litigation. In 2002, Walton granted the FTC’s request for a preliminary injunction against Libbey Inc.’s proposed $332 million buyout of Anchor Hocking, a rival glassware manufacturer. Walton’s decision in that matter indicates, at the very least, an openness to traditional analyses of a horizontal merger’s alleged harms.

Still, Walton hasn’t been afraid to butt heads with—or rule against—the government in court, signaling his draw is in no way an unmitigated win for DOJ.

In fact, his decision in Libbey created a precedent allowing parties to alter merger agreements post-complaint as a path to “litigating the fix.” That could provide an opening Aon and Willis Towers Watson could use to strengthen their litigation position in the weeks leading up to trial.

A spokesperson for DOJ didn’t immediately respond to requests for comment. A representative for Judge Walton declined to comment. Spokespeople for Aon and Willis Towers Watson declined to comment for this story, but pointed to the company’s press release in which it said it disagreed with DOJ’s suit to block the merger.

Public service career. Leading up to the Libbey decision, Walton had compiled years of legal experience.

After obtaining his undergraduate degree at West Virginia State University in 1971, and a law degree at American University’s Washington College of Law in 1974, Walton kicked off his legal career as a staff attorney with the Defender Association of Philadelphia, a public defense organization serving indigent criminal defendants.

Two years later, Walton joined the U.S. Attorney’s Office for D.C. He worked for five years as an assistant U.S. attorney before he was appointed to serve as a justice on the D.C. Superior Court by President Ronald Reagan in 1981. It was a role he would retain for 8 years and reassume after a second appointment by President George H.W. Bush in 1991 for an additional 10 years.

In between Superior Court appointments, Walton worked in the Bush administration, helping direct its drug control policy, and eventually becoming the president’s Senior White House Advisor for Crime.

Walton’s career in public roles shines through in his proceedings to this day, attorneys who have worked on matters before the judge said.

“He is one of these judges who understands where the government is coming from; he relates to the government’s attorneys,” a second attorney said. “He definitely comes across as a judge who understands that side of it and so is therefore kind of sympathetic to the position they’re in.”

Walton’s past rulings and his experience as a judge on the U.S. Foreign Intelligence Surveillance Court show an openness to the federal government’s use of power in some instances, the attorneys said.

Merger review experience. Perhaps most relevant to the Aon case, Walton in his 2002 Libbey decision showed a willingness to use antitrust laws to block mergers the government alleges would harm competition.

The judge was assigned the Libbey case less than six months after joining the District Court. In its suit, the FTC said that the deal would have combined Anchor, the third-largest producer of food service glassware, with Libbey, which held a dominant 72% share of the market.

Years later, Walton recalled Libbey as one of the most memorable and demanding matters he had heard on the bench, citing the amount of attorney power brought to bear and the complexity of the issues before the court.

“That was a little intimidating, not knowing anything about antitrust law,” Walton said.

Despite the learning curve, Walton waded through the arguments and concluded that the FTC’s request to enjoin the transaction met the relevant legal standards and was in the public interest.

The decision not only indicates a willingness to credit the antitrust agencies’ traditional approach to horizontal merger analysis, but also sheds light on how Walton may approach key issues in the Aon case, especially when it comes to remedies.

Libbey was to some extent an atypical merger case, in that the FTC and merging parties for purposes of the litigation agreed on the relevant product market and geographic market at issue. That’s unusual, as market definition is often the issue on which horizontal merger litigations rise or fall.

That question is also likely to be much more controversial in the Aon suit, with the merging parties pushing back against DOJ’s arguments that risk broking and health benefits broking services provided to “large customers” are valid antitrust markets.

But with market definition uncontested, the Libbey litigation revolved largely around a single issue: whether the companies’ move to amend their merger agreement just one week after the FTC filed its complaint to exclude Anchor’s food service glassware business had rendered the deal competitively benign.

On that front, Libbey remains an important case to merging firms’ option to “litigate the fix,” or present to a court a “self-help” remedy that the government’s rejected as a way to resolve their deal’s competitive concerns.

In his decision, Walton concluded that even the companies’ amended merger agreement violated antitrust law, as RCP, the firm that was set to operate Anchor’s food service glassware business through the revised deal, was set to face an unfavorable cost structure and lose key employees. But he also created a precedent allowing merging firms to alter the structures of their deals post lawsuit, and found that the updated agreement is what judges should consider in evaluating a merger’s competitive impact.

“The Court concludes that parties to a merger agreement that is being challenged by the government can abandon that agreement and propose a new one in an effort to address the government’s concerns. And when they do so under circumstances as occurred in this case, it becomes the new agreement that the Court must evaluate in deciding whether an injunction should be issued,” Walton wrote in his Libbey decision.

That view could be meaningful in Aon/Willis Towers Watson, a deal DOJ alleges would harm competition in five distinct product markets. In two—property, casualty, and financial risk broking for large customers, and health benefits broking for large customers—the companies’ proposed divestitures “would not come close to fully maintaining the competition” the merger would eliminate, the department said in its complaint.

On the risk broking front, Aon has agreed to divest a slew of assets—almost entirely in Europe—to rival brokerage Arthur J. Gallagher (AJG) in an effort to address DOJ’s concerns.

But that proposal “falls far short of what would be needed to remedy the harm caused by the merger,” said Richard Powers, the acting head of DOJ’s antitrust division, on a call with reporters last week announcing the suit.

“Proposed divestitures represent a small fraction of the merging parties’ overlapping businesses, and would do little to preserve competition that exists today. Additionally, these divestitures do not have many of the characteristics that the department looks for in evaluating remedies. They do not include complete business units, but rather involve only a small handful of employees, contracts or offices. And they’re not free from ongoing entanglements between the divestiture buyer and the merged firm,” Powers added.

Now that DOJ has sued, however, Aon could seek to divest additional risk broking or health benefits broking assets in an attempt to strengthen its litigation position. Walton’s Libbey decision to some extent created the opportunity for the merging firms to do so.

Remedy questions aside, a final parallel between the Libbey and Aon cases is that in both the acquirer is represented by law firm Latham & Watkins. In fact, Latham partner Marc Williamson, a key player in the Libbey case, is also representing Aon in the Willis Towers litigation.

Personality and pace. Regardless of how he ultimately lands on the parties’ key arguments, Walton can be expected to both run a tight courtroom and give plenty of opportunity for all parties to be heard, the attorneys said.

“He wants to make sure that every lawyer has a chance to make their points, to rebut each other,” the first attorney said. “He’s also not afraid to cut you off when you’re repeating yourself in order to move things along. I think he’s one of the more remarkably deliberate judges on the D.C. bench.”

That deliberateness, however, can slow the pace of his proceedings, some attorneys said.

“There are some judges who are lickety-split: You file a motion and they will rule on it within three months,” a third lawyer said. “He would have things pending in front of him for close to a year or even more than a year.”

The second attorney added, “We certainly wanted a faster pace…He definitely sat on motions longer than we wanted, and even longer than he initially predicted.”

Though Walton can be an active questioner, he tends to sit back and react to arguments rather than set the table, the attorneys added.

“He is a bit distant. He is very formal, distant. He’s not one these judges who likes to talk to lawyers,” the third attorney said. “He’s more of a guy who just sits in his office and deals with lawyers when he has to deal with lawyers. I don’t get the sense that he’s a very personable fellow.”

Others generally agreed with that assessment, but said his distance is more a sign of tact than shyness.

“Judge Walton takes a very professional and respectful tone. But he can laugh if it’s funny, he can lecture when you deserve it, and he can be measured in response when he’s trying to understand things without making up his mind before all the evidence is in,” the first lawyer said.