DOJ Files Motion for Emergency Preliminary Injunction Against Booz Allen and EverWatch Merger
On July 8, 2022, the United States Department of Justice (DOJ) filed a motion for an emergency preliminary injunction to terminate Booz Allen Hamilton Holding Corporation’s (Booz Allen) merger agreement with EverWatch Corp. (EverWatch) and prevent the parties from proceeding with their proposed merger.1 The DOJ motion comes nine days after filed a complaint allege that the proposed merger would significantly lessen competition for the upcoming award of a National Security Agency (NSA) contract for operational modeling and signals intelligence simulation services (best decision). Due to the timing of the proposed merger and the NSA’s impending timeline for accepting offers, the DOJ argues that the preliminary injunction is necessary to ensure that the companies independently submit offers for Optimal Decision.
The motion alleges:
- A condition in the merger agreement requiring EverWatch not to enter into any government contract worth $500,000 or more without Booz Allen’s consent effectively gave Booz Allen final control over any EverWatch bid. for the Optimal Decision contract. The DOJ alleges the condition removed any incentive for both parties to submit a competitive bid because Booz Allen and EverWatch knew they were the only two companies bidding on the contract.
- EverWatch’s attempt to avoid antitrust scrutiny by offering to remedy DOJ concerns by replacing EverWatch as prime contractor for its bid was a “sleight of hand game.” Due to the complexity and number of resources required to compile an offer, the DOJ alleges that EverWatch’s proposal would not be sufficient to create a competitive offer to Booz Allen without EverWatch’s resources.
The new motion is notable because the DOJ’s new argument that the proposed merger agreement violated Section 1 of the Sherman Act stems in large part from the requirement that EverWatch must not enter into a contract with the government of a value of $500,000 or more without Booz Allen’s consent. The DOJ appears to focus on the competitive effects of including such a provision when two companies are competing for a government contract. Provisions like these are typical of merger agreements. Going forward, companies should consider whether these provisions could affect any ongoing competition with merger partners and thus invite the government to review their mergers.
It should also be noted that in response to the DOJ’s motion, EverWatch filed a sanctions motion against the DOJ alleging that the DOJ’s motion included highly confidential investigative materials in violation of civil procedure antitrust law.2 EverWatch said the DOJ misquoted an email exchange between a company executive and a private equity owner, which the company marked “highly confidential” during its production. The motion asks the court to issue a protective order to restrain the DOJ from filing or publicly disclosing other confidential EverWatch documents and to warn and sanction the DOJ. EverWatch’s motion also claims that the DOJ encouraged Everwatch’s proposal to assuage DOJ concerns by replacing itself as prime contractor for its bid. The DOJ has since responded to EverWatch’s request, saying the “highly confidential” designation was unwarranted and that the law allows the DOJ to release the documents. The DOJ further maintained that it never encouraged EverWatch’s proposed solution.
For more information on the DOJ complaint, please contact Scott Sher, Jamillia Ferris, Michelle Yost Hale Ben Labow, or another cabinet member antitrust and competition practice.
 Motion for preliminary injunction, United States v Booz Allen Hamilton Corp., et al, No. 1:22-cv-01603-CCB, (4d Cir. July 8, 2022), available at https://www.law360.com/articles/1510038/attachments/0.
 Application for protection order and sanctions, United States v Booz Allen Hamilton Corp., et al, No. 1:22-cv-01603-CCB, (4d Cir. July 11, 2022), available at https://www.law360.com/articles/1510038/attachments/1.