Back-to-Back Trial Losses Unlikely to Deter Antitrust Division’s Efforts to Take on Labor Market Prosecutions
In the span of 24 hours, two closely-watched federal jury trials both ended in defeat last week for the Department of Justice, Antitrust Division (“the Division”). The trials were considered bellwethers in gauging how the Division’s first criminal prosecutions of companies and individuals accused of allocating labor markets would be received by the American public. In each case, the juries did not merely deadlock, unable to reach a unanimous decision regarding guilt or innocence, but actually acquitted all defendants of all antitrust charges, which included alleged wage-fixing and no-poach agreements.1 Despite these setbacks, the Division is unlikely to pause or even slow its efforts to take on complex, difficult to prove cases, especially when competition in labor markets is at issue. Indeed, that the cases were allowed to reach a jury at all is likely viewed as a win by the Division, which has argued strenuously in multiple forums that the conduct at issue should be prosecuted criminally and lauded both judges’ refusal to grant motions to dismiss the charges. With additional labor collusion trials forthcoming, the Division is poised for more bites at the apple to try to notch a win in this new enforcement area. We also expect the Division will continue to vigorously investigate this conduct via grand jury investigations and possible leniency applications. The Division ended the most recent fiscal year with more open grand jury investigations than ever before. Consequently, it remains crucial that companies implement thoughtful compliance regimes and retain experienced antitrust counsel to navigate the still uncertain waters ahead.
First on April 14, 2022, in United States v. Jindal, a jury in the Eastern District of Texas acquitted the former owner and former clinical director of a physical therapist staffing company on charges that they conspired to fix the wages and rates paid to physical therapists and physical therapist assistants in the Dallas-Fort Worth area. The jury convicted one defendant on the lone charge of obstructing an FTC investigation, while acquitting on the substantive antitrust charges. Jindal was the first ever criminal prosecution for alleged wage-fixing agreements in the United States, and the Division argued that wage-fixing is akin to price-fixing in the labor market. The Division achieved an early victory in the case when the judge denied the defendants’ motion to dismiss and recognized that wage-fixing may be a cognizable per se violation under Section 1 of the Sherman Act. However, despite this win on the law, the jury did not agree that the facts presented at trial bore out a crime, finding that the Division had not carried its burden to prove that the defendants conspired to fix wages. The jury deliberated for less than a full day before reaching its unanimous not-guilty verdict.
Then on April 15, 2022, in United States v. DaVita, a jury in the District of Colorado acquitted DaVita, Inc., a kidney dialysis services company, and its former CEO on all counts of allegedly conspiring to suppress competition in the labor market. Even more novel than Jindal, in this “no-poach” prosecution, the Division alleged that the defendants entered into a purportedly illegal agreement not to approach one another’s employees without prior approval of and notification to the company for which the employee currently worked. The term “no-poach” is used to encompass a variety of agreements between companies regarding the hiring and recruiting of employees. The Division argued that the alleged no-poach agreement in DaVita constituted labor market allocation and a per se criminal violation of Section 1 of the Sherman Act. As in Jindal, the Division notched an early win in the case when the judge denied the defendants’ motion to dismiss and found that, depending on the facts, some non-solicitation agreements could possibly constitute per se violations as unlawful market allocations. Further, the judge denied the defendants’ motions for judgment of acquittal and allowed the case to go to the jury. However, the jury found the Division’s case lacking, as it cleared the defendants of all charges.
Testimony elicited by the defense at trial demonstrated that others in the industry feared getting on the wrong side of DaVita’s CEO and may have demurred to his demands not to recruit away DaVita employees without his OK in order to maintain goodwill and avoid his wrath.2 Thus, what the Division described as cheating employees out of job opportunities was alternatively explained by the defense as trying to keep a difficult colleague happy and lacking the intent to stifle competition and allocate the market for employees.3 Evidence presented at trial further suggested that employees at the companies at issue had no shortage of employment opportunities elsewhere and were not harmed by the agreements DaVita and its CEO may have entered regarding solicitation of employees and executives.4
While these two trial losses are clear setbacks, they are unlikely to deter the Division in its efforts to prosecute alleged collusion in labor markets, even when the cases are novel or difficult to prove. The Division has made clear in recent speeches that it sees taking on “tough cases” as its duty and that it will pursue complex or novel cases despite the possibility of a loss at trial.5 To that end, the Division is bolstering its ranks, hiring seasoned litigators and trial attorneys to add more fire power as antitrust prosecutors prepare for a number of upcoming trials. In one criminal case that exemplifies its fortitude, the Division is gearing up for a third round after two juries hung and failed to convict ten individuals charged by the Division with price-fixing in the poultry industry. The insistence required to re-try defendants for a third time evidences the Division’s commitment to trying cases that are close to the line and difficult to prove.
Labor markets have been an area of particular focus for the Division over the past four years and it has several more labor market prosecutions pending in federal courts around the country. Indeed, Surgical Care Affiliates, one of the companies accused of conspiring with DaVita, faces its own trial in federal court in Texas later this year. In its statement announcing the jury verdict in Jindal, the Division focused on its win at the motion to dismiss stage, emphasizing that the court’s rulings “make clear” that collusion impacting labor markets is “per se illegal.” Indeed, antitrust prosecutors may very well double down on labor cases, and continue to try to convince future juries to convict, particularly in light of multiple successes in defeating motions to dismiss. The Division also remains on high alert to open new investigations in this area.
Despite two trial losses, the continued enthusiasm from the Division for labor market prosecutions means that companies should implement rigorous and thoughtful compliance systems to deter potential no-poach violations before they happen and to promptly detect missteps when they do. An acquittal at trial may be small comfort if a company must first endure a lengthy investigation and reputation-harming indictment. Indeed, litigating an antitrust matter to trial involves significant financial costs and business disruptions that may be avoided through comprehensive trainings and compliance best practices. The Division’s flagship Leniency Program offers companies that are the first to report misconduct the opportunity to earn immunity from prosecution. As we reported last week, recent updates to the Leniency Program mean that, now more than ever, timing is of the essence in seeking such immunity.
1 In FY ‘21, only 8% of federal defendants charged were not convicted, and of that 8% approximately 96% had their cases dismissed with only approximately 2.5% actually receiving an acquittal at trial. See Table 5.4, U.S. District Courts—Criminal Defendants Disposed of, by Method of Disposition, During 12-Month Periods Ending June 30, 1990, and September 30, 1995 Through 2021, U.S. Courts (Sept. 30, 2021), https://www.uscourts.gov/sites/default/files/data_tables/jff_5.4_0930.2021.pdf.
2 Sam Tabachnik, Unprecedented antitrust case against DaVita, ex-CEO Kent Thiry now in hands of federal jury, Denver Post (Apr. 13, 2022), https://www.denverpost.com/2022/04/13/davita-kent-thiry-trial-jury/.
3 Shelly Bradbury, Attorneys focus on intent, effect of non-poaching agreements as trial of DaVita, ex-CEO Kent Thiry opens in Denver, Denver Post (Apr. 5, 2022), https://www.denverpost.com/2022/04/05/davita-kent-thiry-conspiracy-trial-antitru.
5 Michael Acton & Lewis Crofts, US DOJ bringing difficult cartel cases ‘the right thing’ to do, enforcer says, Mlex (Apr. 6, 2022).
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