DOJ Amends and Clarifies Temporary Suspension of Affirmative Civil Debt Collection and Enforcement Activities During COVID-19 Pandemic Regarding Affirmative Civil Enforcement Matters

Nelson Mullins Riley & Scarborough LLP

Nelson Mullins Riley & Scarborough LLP

By Memorandum dated April 13, 2020, Corey F. Ellis, Acting Director of the Executive Office for the United States Department of Justice (“DOJ”) issued a memorandum to all United States attorneys (USAOs) clarifying a prior Memorandum issued March 31, 2020 (entitled “Temporary Suspension of Affirmative Civil Debt Collection and Enforcement Activities during the COVID-19 Pandemic”), specifically addressing affirmative civil enforcement (ACE) matters. See attached March 31 and April 13 Memos for additional details. ACE matters for purposes of the April 13 Memo include: “False Claims Act, FIRREA, and other cases brought for damages, civil penalties, and/or equitable remedies. “ACE litigation” does not include suits for debts on a sum certain referred by agencies, such as suits to collect student loans or SBA loans.” See April 13 Memo at page 2, FN 1. Note the provisions do not apply in criminal cases. The March 31 Memo also should not be read to be a lessening of other enforcement activities.

The March 31 Memo announced a temporary suspension of affirmative debt collection and enforcement extended to the filing of liens. However, in the April 13 Memo clarification, DOJ provides that: “the filing of judgment liens against debtors’ property directly protects the government’s interests and does not require a response from the debtor. Therefore, effective immediately, the Temporary Suspension – as it relates to the filing of liens only – is lifted.” See April 13 Memo at pages 1-2.

The April 13 Memo also clarifies a number of questions that it notes have arisen from the March 31 Memo, including:

  • There is no suspension on the U.S. Attorney’s office (USAO) ability to investigate or take action (file complaints, litigate to judgement, or settle) on any ACE matter that is on-going – ongoing litigation, appeals, or cases that are not subject to final, non-appealable judgement.
  • There is no limit on the USAO collecting settlement payments pursuant to a voluntary settlement agreement. This includes collection of settlement payments that would be due over time, including payment of amounts due during the suspension period. These payments are not considered debts on “active payment plans with FLUs” as interpreted for the March 31 MemoApril 13 Memo at 2.
  • There is no limit on pursuing remedies, including default judgment, made available to the United States under the terms of a settlement agreement if the settlement agreement is breached in some aspect.
  • In the event of a default judgment, the USAO cannot execute on the judgment through May 31, 2020. However, the April 13 Memo provides that this does not affect the accrual of interest or other amounts that may become due as a result of delaying any payment, and does not prevent the USAO from filing a judgment lien, identifying the availability of assets for collection, nor taking other actions needed to protection the government’s interests. The USAO should take any action it deems necessary to prevent, in its view, a defendant’s efforts to dissipate or fraudulently transfer assets.

The April 13 Memo does remind enforcement officers that although the suspension language does not apply to pre-judgement ACE matters, it is the intent of the Memorandum to “provide financial respite during the crisis” and that it may be appropriate to consider such relief in appropriate cases. UASOs are “encouraged to use their discretion when negotiating appropriate resolution s in their ACE cases.” April 13 Memo at page 3. UASOs are reminded that they should take every effort to protect the interest of the government, and that if it appears an ACE defendant may file bankruptcy, the USAO’s should proceed in best protecting the government’s interest, including consulting bankruptcy counsel. 

These Memos should be reviewed carefully when seeking protection from the matters addressed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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