DOJ: Wage-Fixing Antitrust Civil Case Should Survive Acquittals in Criminal Case

A federal court jury in Denver returned not guilty verdicts in the government’s criminal case against DaVita Inc. and its former CEO, in which the DOJ charged they conspired with competitors to suppress wages through no-poach agreements. These verdicts, however, do not support dismissing a separate civil action pending in federal court in Illinois, as the verdicts “have no bearing” on whether the Illinois complaint states a claim as a matter of law, the government argues. (Read our previous post, “Despite Defense Verdicts in Wage-Fixing Antitrust Suits, Feds Remain Resolute” by Timothy Z. LaComb.)

In filing a statement of interest in the Illinois civil case, In Re Outpatient Medical Center Employee Antitrust Litigation, the DOJ said, “[P]laintiffs pleaded a per se violation of Section 1 of the Sherman Act by alleging that ‘the defendants—competitors for the plaintiffs’ labor—agreed to divide certain employees among themselves and compete for those employees’ labor only on specified terms.’ Because the jury’s verdicts do nothing to undermine this legal proposition, they do not support dismissal of the plaintiffs’ Section 1 claim.” The ruling in the criminal matter, DaVita, counsels against dismissal of the civil case, the DOJ maintains.

“As the DaVita court recognized, the non-solicitation agreement alleged in the indictment was a horizontal market-allocation scheme … and horizontal market-allocation schemes are per se Section 1 violations …. The United States’ Statement of Interest urges this Court to reach exactly the same conclusions and likewise to hold that this case should proceed under a per se theory,” the government argues.

The DOJ argues that the DaVita court erred, though, in holding that the U.S. would have to prove “more than that the defendants had entered into a non-solicitation agreement” — that it would have to prove the defendants “intended to allocate the market.” DOJ says proving that defendants knowingly conspired to act illegally is all that is required to establish a per se offense in an interstate commerce case. Establishing “intent to restrain trade or commerce” is not required.

The government noted a May 2 ruling by the Second Circuit in U.S. v. Aiyer, which held that to prevail in a criminal antitrust case the government needs only prove that the offense occurred. Quoting U.S. v. Koppers, the Second Circuit said there are “no other elements to the offense and no allowable defense.” There is no need to prove that a criminal defendant was aware of the anticompetitive effects of his misconduct, the government argues.

Second Circuit: Per Se Restraints on Trade are “Categorically Unreasonable”

In U.S. v. Aiyer, a federal court jury in the Southern District of New York convicted Akshay Aiyer of conspiracy to fix prices and rig bids in connection with his trading activity in the foreign currency exchange market, a restraint of trade that violates of Section 1 of the Sherman Act.

Aiyer appealed, saying the district court erred by failing to consider evidence that his conduct had procompetitive, not anticompetitive, effects, which prevented him from arguing that he didn’t intend to break the law. The district court also erred, he said, by refusing to conduct a pre-trial assessment as to whether the per se rule or the rule of reason applied in the case.

The Second Circuit rejected these arguments. On May 2 the panel held that the district court was not required to make a threshold pre-trial determination as to whether the per se rule or the rule of reason applied. The grand jury indicted Aiyer for a per se antitrust violation and the government, which was proceeding only under that theory, was entitled to present its case to the jury, the Second Circuit found. Further, the appeals court said, the district court properly assessed the sufficiency of the evidence of the alleged per se violation when Aiyer filed a Rule 29 motion after the government rested its case. Given that the case was being tried under the per se rule, the district court acted within its broad discretion in strictly limiting the admission of Aiyer’s competitive effects evidence at trial to the issue of intent, the Second Circuit found.

“[R]estraints on trade that are subject to the per se rule, such as price fixing and bid rigging, are categorically unreasonable, such that proof of reasonableness — which is to say, a lack of anticompetitive effects and/or the presence of procompetitive benefits — is not required,” wrote the Second Circuit.

Aiyer separately asserted that the district court’s exclusion of “effects evidence” was error because it significantly impaired his ability to prove that he lacked criminal intent. While intent is necessary in a criminal antitrust case, the appellate court held that when the per se rule governs restraint of trade “nothing more is required than a showing that the defendant intentionally engaged in conduct that is a per se violation of the Sherman Act,” citing U.S. v. Koppers.

Read our previous post by Jennifer Oliver, “Entering Into a Naked No-Poach Agreement? Bring a Lawyer.” Oliver wrote: “Many employers don’t realize that these type of arrangements can be considered anticompetitive or that their employment agreements could create antitrust issues at all when, in fact, they can be quite problematic. MoginRubin recently counseled a client in an M&A deal where a no-poach agreement cratered the entire deal. The buyer discovered the issue, the seller wasn’t aware it was an issue, and the buyer didn’t want to assume any liability. Deal over.”

Edited by Tom Hagy for MoginRubin LLP.

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