Over the summer, the Biden administration issued a sweeping executive order aimed at boosting competition across the U.S. economy, including encouraging the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) to strengthen the 2016 guidance related to “no-poach” and wage-fixing criminal prosecutions. As early as October 2016, before the Biden administration, the DOJ warned that it was investigating wage-fixing and so called no-poach arrangements between competitors.
The first indictment came in December 2020 in the Eastern District of Texas – United States v. Neeraj Jindal and John Rodgers, Case No. 20-cr-00358. The DOJ charged two Texas businessmen with participating in a price-fixing conspiracy aimed at lowering the rates paid for physical therapists and their assistants. The defendants were also charged with obstructing an FTC proceeding stemming from statements made to regulators during the investigation stage. The defendants filed a motion to dismiss arguing that there was no precedent for bringing criminal charges over a wage fixing agreement, which was denied at the end of November. This case is set for trial in April 2022.
The second indictment came in January 2021 in the Northern District of Texas – United States v. Surgical Care Affiliates, LLC, et al, Case No. 21-cr-00011. The Indictment accuses Surgical Care, a unit of United Health Group, of devising separate agreements with two health care companies not to solicit each other’s senior level employees. The Surgical Care case is the first publicly filed criminal case regarding so-called “no poach” agreements. Surgical Care has been aggressively litigating the case. It filed a motion to dismiss, which remains undecided. Surgical Care also recently filed motions seeking Brady information, a bill of particulars, and requesting a James hearing. Surgical Care sought, among other items, a list of “targeted” employees, a definition of “senior level employees”, and a list of unindicted co-conspirators. Surgical Care wanted a James hearing on the admissibility of co-conspirator statements. The government opposed the request arguing that Surgical Care is simply seeking an early preview of the government’s case and that it has already produced a great deal of documents to Surgical Care with a detailed index.
In Las Vegas, Nevada, on March 30, 2021, a grand jury returned a one count indictment charging VDA OC, LLC and a former manager, Ryan Hee, for conspiring with an unnamed competitor company to allocate employee nurses and to fix those nurses’ wages, in violation of the Sherman Act. The case is United States v. Hee, Case No. 21-cr-00098. The Indictment alleges that agreements were entered into for the provision of healthcare staffing services that allocated nurses and fixed the wages of those nurses. According to the indictment, the co-conspirators agreed not to hire each other’s nurses through conversations and other communications. The conversations included agreements to refuse further wage increases and agreements not to recruit or hire co-conspirator’s nurses. VDA OC, LLC and Hee have filed motions to dismiss the Indictment arguing that the conduct charged was not illegal and that if it was they did not have notice of same. The motion is pending.
Finally, in July 2021, the DOJ indicted DaVita, an operator of kidney dialysis centers, and its former CEO of colluding with competitors on agreements not to recruit one another’s senior level employees. One competitor was Surgical Care. The case against DaVita was filed in the District Court of Colorado and has received a great deal of attention. Like Surgical Care and VDA OC, LLC, DaVita filed a motion to dismiss arguing that the conduct charged was not illegal.
In responding to the motions to dismiss filed, the DOJ generally argues that no-poach deals should be considered one of the three types of conduct courts have identified as per se antitrust violations: price fixing, market allocution, and bid-rigging. The DOJ further argues that agreements to divide up the workforce should be no different from divvying up a market.
The U.S. Chamber of Commerce is supportive of Surgical Care and DaVita going as far as filing an amicus brief in both cases blasting the DOJ stating that classifying these no-poaching agreements as per se illegal violates the separation of powers and cannot provide the fair notice required by due process. The Chamber also argued defendants lacked fair notice required to know that conduct was illegal because no court had declared non-solicitation agreements to be per se illegal.
All four cases are gearing up for trial, which is a clear indication that legal counsel for the individuals and entities have analyzed the evidence and law and believe acquittals are more than a mere possibility.
Regardless, the DOJ has dedicated a great deal of resources to this area of enforcement, so all those operating in the health care industry and other industries should tread carefully in reaching any agreements with competitors that may implicate the DOJ’s initiatives to eradicate out no-poach agreements and wage-fixing.