On April 15, 2022, WilmerHale, together with co-counsel Morgan Lewis & Bockius, achieved a landmark and precedent-setting victory for our client DaVita, Inc., in the first-ever trial of a criminal labor market allocation case brought by the Department of Justice (DOJ). After a two-week trial and two days of deliberation, a federal jury in Denver acquitted both the company and its former CEO, Kent Thiry, on all charges-three counts of criminal conspiracy to violate Section 1 of the Sherman Antitrust Act. This victory came on the heels of the DOJ's loss in United States v. Neeraj Jindal et al., a first-of-its-kind wage-fixing case in Sherman, Texas. Both DaVita and Jindal represent defeats in the first labor market cases that the DOJ has brought to trial since its October 2016 announcement that it would seek to criminally prosecute not only wage-fixing agreements, but also non-solicitation and no-hire agreements (together often referred to as "no-poach" agreements) as market allocation agreements.1

In Jindal, the DOJ charged the former owner and former clinical director of a Texas-based healthcare staffing company with conspiring to fix wages by agreeing with another staffing company to share and fix nonpublic pay rates for physical therapists and physical therapist assistants. The DOJ also charged defendants with obstruction of justice for making false and misleading statements to and withholding and concealing information from the Federal Trade Commission in the initial civil investigation of the matter.2  The defendants denied that they had agreed to fix wages. On April 14, 2022, after a six-day trial and less than a day of deliberation, the jury acquitted the defendants of all antitrust charges but convicted Jindal of obstruction of justice.3

In DaVita, prosecutors claimed that "gentlemen's agreements" between DaVita and three other healthcare firms not to proactively solicit DaVita's employees amounted to per se illegal market allocation agreements, which limited workers' ability to obtain higher wages, advance their careers and compete in a free marketplace for labor.4 The evidence left little doubt that DaVita and Thiry had agreements with other companies not to proactively solicit certain employees. But, by arguing that the defendants' purpose and intent was not to allocate a market for employees, and that the agreements were not capable of actually doing so, the defense team was able to secure the first-ever victory in these uncharted waters.

This successful strategy paralleled the strategy in WilmerHale's 2018 victory in the criminal antitrust foreign exchange case United States v. Usheret al.,5 where the defendants also successfully challenged the nature, purpose and intent of the alleged agreement. In both cases, the DOJ sought to expand per se criminal antitrust treatment into new and unusual contexts. In Usher, the indictment alleged a price-fixing agreement in the context of the foreign exchange markets in which the defendants traded and communicated with each other in an allegedly collusive chat room. Unlike in the traditional criminal antitrust prosecution, the defendants were active trading counterparties with one another. Despite documents riddled with inflammatory language, including references to the chat room at issue as a "cartel" and damaging admissions by the banks, which had pled guilty and paid $2.5 billion in criminal fines to settle these price-fixing charges,6 WilmerHale demonstrated that the traders never intended to fix prices in the foreign exchange markets and thus secured an acquittal for its client, Citibank trader Rohan Ramchandani. Through cross-examination and direct defense testimony, the jury heard about the procompetitive purpose of the conduct and its widespread use in the industry, part of the strategy of showing that the agreements were not "naked" price fixing.

Similarly, in DaVita, WilmerHale and its co-counsel demonstrated that despite testimony and documents showing an agreement not to proactively solicit certain employees, DaVita and Thiry never intended to allocate the market for those employees and that the agreements never resulted in "cessation of meaningful competition" in the supposedly allocated market. The cross-examination of government witnesses provided testimony on those key defense points and ultimately undermined the allegation that the conduct constituted a per se illegal market allocation. And critically, at the defense team's urging, the judge gave the jury the following instruction on the per se standard:

If defendants entered into an agreement or understanding with the intent to allocate the market, it is immaterial whether such an agreement or understanding was actually good for the company or even good for the market as a whole. However, evidence of lack of harm or procompetitive benefits might be relevant to determining whether the defendants entered into an agreement with the purpose of allocating the market.7

In some traditional criminal antitrust cases, defendants will be hard-pressed to take advantage of the second sentence because mere absence of competitive harm may be unlikely to undermine a finding of purpose to harm competition. However, in cases where the DOJ expands the scope of conduct for criminal prosecution, largely through analogy, evidence of procompetitive benefit and the absence of harm can effectively undercut the analogy. The hallmark of a per se price-fixing or market allocation agreement, of course, is that it is intended to harm counterparties with which the conspirators deal and is devoid of benefit to competition. By undercutting both elements, defenses like the one presented by WilmerHale in DaVita and Usher can enable juries to see through the label attached by the prosecution and make factual determinations critical to whether the conduct actually constituted a naked per se agreement. In DaVita, the evidence showed that the agreements were driven by an intent to maintain cooperative business relationships while at the same time allowing employee movement and even fostering "price competition" for employees' services in the form of higher wages and promotions. In Usher, the evidence showed that the charged behavior increased traders' access to liquidity, reduced risk to the banks and enabled better pricing to customers.

Continued Enforcement in Labor Markets

Together, these verdicts have dealt a serious blow to the DOJ's aggressive agenda and will likely have repercussions for future prosecutions; however, the DOJ's focus on bringing labor market cases is unlikely to abate. The Biden Administration and Attorney General Merrick Garland have made protecting competition in labor markets among the DOJ's highest priorities.8 Thus, despite the losses in DaVita and Jindal, the DOJ will press forward with aggressive enforcement in this area. James Fredericks, Chief of the Antitrust Division's Criminal II Section, recently described labor market collusion as "one of the most insidious" types of anticompetitive conduct and said that the DOJ will not hesitate to bring criminal charges for collusion in labor markets, including in sectors beyond the healthcare industry.9

Although the DOJ should be chastened by the trial losses, it may instead be emboldened by the fact that both courts agreed that wage-fixing and non-solicitation agreements in a labor market could, under certain circumstances, constitute per se offenses.10 The DOJ has been expending enormous resources in enforcing against conduct involving labor markets and appears focused on obtaining criminal convictions. The DOJ has launched many investigations in this area. While several investigations have been opened and closed without publicity, the DOJ has filed several other cases that are proceeding to trial.11 We anticipate that having established some key legal principles, the DOJ will continue its focus on these investigations and prosecutions.

Companies are therefore well advised to develop targeted compliance measures and policies to educate their employees on potential criminal or civil liability arising from these types of agreements, and to avoid even the appearance of no-hire, non-solicitation and wage-fixing agreements.

For more information on WilmerHale's landmark and precedent-setting victory on behalf of DaVita or additional guidance on compliance and corrective measures, responding to investigations, and defending against the DOJ's continued efforts to criminally prosecute labor market agreements, please contact the authors below or another member of the firm's Antitrust and Competition Practice.

Footnotes

1. Department of Justice and Federal Trade Commission, Antitrust Guidance for Human Resources Professionals  (Oct. 2016), https://www.justice.gov/atr/file/903511/download.

2. First Superseding Indictment, Dkt. 21, United States v. Neeraj Jindal et al., No. 4:20-cr-00358-ALM-KPJ (E.D. Tex. April 15, 2021); Press Release, Department of Justice, Former Owner of Health Care Staffing Company Indicted for Wage Fixing (Dec. 10, 2020), https://www.justice.gov/usao-edtx/pr/former-owner-health-care-staffing-company-indicted-wage-fixing; Press Release, Department of Justice, Second Individual Charged with Fixing Wages for Health Care Workers and Obstructing FTC Investigation (Apr. 19, 2021), https://www.justice.gov/opa/pr/second-individual-charged-fixing-wages-health-care-workers-and-obstructing-ftc-investigation.

3. Verdict, United States v. Neeraj Jindal et al., No. 4:20-cr-00358-ALM-KPJ (E.D. Tex. Apr. 14, 2022).

4. Superseding Indictment, Dkt. 74, United States v. DaVita, Inc. et al., No. 21-cr-00229-RBJ (D. Colo. Nov. 3, 2021).

5. WilmerHale Beats Long Odds to Win Client's Acquittal in High-Profile Federal Forex Trial  (Nov. 20, 2018), available at https://www.wilmerhale.com/en/insights/news/20181120-wilmerhale-beats-long-odds-to-win-a-clients-acquittal-in-a-high-profile-federal-forex-trial.

6. Press Release, Department of Justice, Five Major Banks Agree to Parent-Level Guilty Pleas  (May 20, 2015), available at https://www.justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas.

7. Final Jury Instructions, Dkt. 254 at 21–22, United States v. DaVita, Inc. et al., No. 21-cr-00229-RBJ (D. Colo. Apr. 13, 2022).

8. Press Release, Department of Justice, Departments of Justice and Labor Strengthen Partnership to Protect Workers  (Mar. 10, 2022), https://www.justice.gov/opa/pr/departments-justice-and-labor-strengthen-partnership-protect-workers; Merrick B. Garland, Attorney General, Department of Justice, Remarks at the White House Roundtable on the State of Labor Market Competition in the US Economy (Mar. 7, 2022), https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-white-house-roundtable-state-labor; Jonathan Kanter, Assistant Attorney General, Department of Justice, Antitrust Division, Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york; Vanita Gupta, Associate Attorney General, Department of Justice, Antitrust Division, Remarks at Georgetown Law's 15th Annual Global Antitrust Enforcement Symposium (Sept. 14, 2021), https://www.justice.gov/opa/speech/associate-attorney-general-vanita-gupta-delivers-remarks-georgetown-law-s-15th-annual; Press Release, The White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

9. ABA Antitrust Section Spring Meeting Sessions: Key Points from Antitrust Enforcers (April 6-8, 2022) (Apr. 13, 2022), https://www.wilmerhale.com/en/insights/client-alerts/20220413-aba-antitrust-section-spring-meeting-sessions-key-points-from-antitrust-enforcers.

10. Order Denying Defendants' Motion to Dismiss, Dkt. 132, United States v. DaVita, Inc.et al., No. 21-cr-00229-RBJ (D. Colo. Jan. 28, 2022); Memorandum and Order, Dkt. 56, United States v. Neeraj Jindal et al., No. 4:20-cr-00358-ALM-KPJ (E.D. Tex. Nov. 29, 2021).

11. See, e.g., Press Release, Department of Justice, Four Individuals Indicted on Wage Fixing and Labor Market Allocation Charges (Jan. 22, 2022) (United States v. Manahe, et al.), https://www.justice.gov/opa/pr/four-individuals-indicted-wage-fixing-and-labor-market-allocation-charges; Press Release, Department of Justice, Former Aerospace Outsourcing Executive Charged for Key Role in a Long-Running Antitrust Conspiracy (Dec. 9, 2021) (United States v. Patel et al.), https://www.justice.gov/usao-ct/pr/former-aerospace-outsourcing-executive-charged-key-role-long-running-antitrust-conspiracy; Press Release, Department of Justice, Health Care Staffing Company And Executive Indicted For Colluding To Suppress Wages Of School Nurses  (Mar. 30, 2021) (United States v. Hee et al.), https://www.justice.gov/usao-nv/pr/health-care-staffing-company-and-executive-indicted-colluding-suppress-wages-school; Press Release, Department of Justice, Health Care Company Indicted for Labor Market Collusion (Jan. 7, 2021) (United States. v. Surgical Care Affiliates, LLC et al.), https://www.justice.gov/opa/pr/health-care-company-indicted-labor-market-collusion.

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