DOJ Antitrust Division Intervenes in Private No-Poach Class Action to Obtain Right to Enforce Settlement Agreement
On November 9, 2019, the DOJ Antitrust Division issued a press release detailing its role in the resolution of a private no-poach class action against Duke University and the University of North Carolina for their alleged agreement not to compete for each other’s medical faculty. Earlier this year, DOJ took the unprecedented step of intervening in the private litigation for the limited purpose of joining the proposed settlement to obtain the right to enforce injunctive relief against Duke.1 The court’s final judgment order allows DOJ to enforce a settlement provision (negotiated between the private litigants) prohibiting Duke from entering, maintaining, or enforcing unlawful no-poach agreements for five years. DOJ’s involvement in this case is further evidence that the Antitrust Division’s crusade against anticompetitive conduct impacting labor markets continues, and foreshadows future no-poach criminal enforcement actions.
The Case Against Duke and UNC
In June 2015, an assistant professor at Duke University School of Medicine filed a class action complaint in federal court against Duke and UNC alleging that the universities violated Section 1 of the Sherman Act by agreeing not to permit lateral hiring of faculty members between the universities.2 The complaint alleged that the agreement between Duke and UNC, the two largest academic medical systems in North Carolina (and two of the largest employers in the state), reduced competition for medical faculty and staff, thereby suppressing faculty pay.3 In March 2018, the court certified a class consisting of faculty members with an academic appointment at either school. Shortly thereafter, UNC settled, agreeing, among other terms, to an injunction against entering or enforcing any no-poach agreement for a period of five years.4
More than a year later, in April 2019, the remaining Duke defendants also agreed to settle, and in May 2019, the Antitrust Division intervened in the case for the sole purpose of joining the settlement to enforce injunctive relief against Duke.5 The settlement terms prohibit Duke from entering into an unlawful no-poach agreement, and require the university to implement comprehensive notification and compliance measures to prevent future no-poach agreements. In its motion to intervene, the Division stated that “the United States has a significant interest in the proposed injunctive relief . . . and it has repeatedly enforced the antitrust laws against anticompetitive no-poach agreements.”6 Significantly, this is the first time the Division has intervened in a private no-poach suit to obtain the right to enforce injunctive relief against a settling defendant.7
The Antitrust Division’s Recent No-Poach Enforcement Efforts
The Division’s action in the Duke/UNC case is the latest development in its increased focus on no-poach agreements. As we previously reported, beginning in 2010, DOJ launched a series of investigations into several technology and media companies’ employment practices, which led to settlements and follow-on class-action litigation totaling over $400 million. In April 2018, the Division initiated a civil enforcement action against Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp. (“Wabtec”), two of the world’s largest rail equipment suppliers, for their alleged agreement not to solicit, recruit, or hire each other’s employees without prior approval, or otherwise compete for each other’s employees.8 The settlement agreement in that case prohibits Knorr and Wabtec from entering into no-poach agreements with any other companies, and requires both companies to implement rigorous notification and compliance measures to prevent further no-poach behavior.9
The government’s recent interjection in the Duke/UNC is significant because it takes the Division’s activity in this area one step further. Now, as an alternative to bringing its own civil enforcement action, the Division can police no-poach conduct challenged through private litigation. The final Duke settlement agreement mimicked many of the terms of consent judgment between Knorr, Wabtec and the Division, further demonstrating the government’s increasing influence on no-poach issues.10
The Division’s Activity Foreshadows Criminal Prosecution
The Division’s recent activity in this area illustrates a continued progression towards prosecuting no-poach conduct criminally. As we previously wrote, in 2016, DOJ and the Federal Trade Commission jointly issued a guidance document titled Antitrust Guidance for Human Resources Professionals, in which they made clear that, going forward, no-poach or “mutual no-hire” agreements would be subject to criminal prosecution. Two years later, the Division brought the civil Knorr/Wabtec enforcement action, and explained that it did not bring the case as a criminal matter because the conduct at issue pre-dated the 2016 guidance. The Division’s competitive impact statement, however, characterized no-poach agreements as “per se” unlawful market allocation agreements. In the antitrust realm, the per se standard, under which conduct is deemed inherently unlawful, generally is reserved for “hard core” criminal antitrust conduct, such as price-fixing, bid-rigging and market allocation. In the government’s view, no-poach agreements between competing employers deserve similar treatment because they are a form of market-allocation agreement and “eliminate competition” for the employees impacted by the agreement.11
In the Duke/UNC case, the Division filed a Statement of Interest that reinforced its position by advocating for application of the per se standard, even in private litigation.12 There, DOJ urged the court that it “should not hesitate” to declare the agreement per se unlawful.13 Although courts have yet to hold on the merits that a no-poach agreement is subject to the per se standard,14 adoption by the courts of this standard would lower the burden for potential plaintiffs in private litigation, and also further pave the way for successful criminal enforcement actions by DOJ. Given the Division’s action in this case, and its recent warnings regarding potential criminal enforcement, it is only a matter of time before the Division brings its first no-poach criminal enforcement action. Grand jury investigations in this area are reportedly underway. Until then, we can expect the Division to continue its crusade to root out no-poach behavior, even in purely private litigation.
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1 Press Release, U.S. Dep’t of Justice, Justice Department Comments on Settlement in Private “No-Poach” Class Action That Allows Government to Enforce Injunction Against Duke University (Nov. 8, 2019), https://www.justice.gov/opa/pr/justice-department-comments-settlement-private-no-poach-class-action-allows-government (“November 2019 Press Release”).
3 Second Am. Compl. ¶ 2, Seaman v. Duke University and Duke University Health System, No. 1:15-cv-000462-CCE-JLW, ECF No. 109 (M.D.N.C. Oct. 10, 2017).
4 Settlement Agreement with UNC Defendants, Seaman v. Duke, ECF No. 83-1 (Aug. 25, 2017).
5 Mem. In Supp. United States of America’s Unopposed Mot. to Intervene at 2, Seaman v. Duke, ECF No. 352-1 (May 20, 2019).
6 Id. at 4.
7 November 2019 Press Release.
8 Press Release, Dep’t of Justice, Justice Department Requires Knorr and Wabtec to Terminate Unlawful Agreements Not to Compete for Employees (Apr. 3, 2018), https://www.justice.gov/opa/pr/justice-department-requires-knorr-and-wabtec-terminate-unlawful-agreements-not-compete (“April 2018 Press Release”).
10 Under the UNC Settlement Agreement, the UNC defendants agreed to the same injunctive relief as in the consent decree entered in United States v. Adobe Systems, Inc. et al., against several technology and media companies, discussed above. Settlement Agreement with UNC Defendants, Seaman v. Duke, ECF No. 83-1 (Aug. 25, 2017); see Final Judgment, Case No. 1:10-cv-01629 (D.D.C. Mar. 17, 2011), available at https://www.justice.gov/atr/case-document/final-judgment-0.
11 April 2018 Press Release.
12 Statement of Interest of the United States of America at 29, Seaman v. Duke, ECF No. 325 (Mar. 7, 2019).
14 Id. at 25.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.