On September 13, 2013, Judge Rosen of the U.S. District Court for the Eastern District of Michigan issued an Opinion and Order in an alleged wage suppression antitrust case certifying a class of over 20,000 Registered Nurses (“RNs”) in Cason-Merenda, et al. v. Detroit Medical Center, Case No. 06-15601, 2013 U.S. Dist. LEXIS 131006 (E.D. Mich. Sept. 6, 2013). The decision greatly raises the stakes for employers that engage in the exchange of wage information in ways that do not comply with the statements of enforcement policy issued jointly by the Department of Justice and the Federal Trade Commission (“DOT/FTC Statements”).

Background

Plaintiffs alleged that eight Detroit area hospitals had engaged in a conspiracy to suppress nurse wages in the Detroit Metropolitan Area (“DMA”). Plaintiffs alleged in count I that the defendants entered into an agreement to suppress RN wages which violated §1 of the Sherman Act per se. In count II plaintiffs alleged that the defendants exchanged RN wage information and that the effect of the exchange unlawfully suppressed RN wages in the DMA in violation of §1 of the Sherman Act under the rule of reason. In previous decisions the Court granted the defendants’ motion for summary judgment as to count I but denied it as to count II.  It also denied the defendants’ motion to exclude the testimony of plaintiffs’ expert, Dr. Orley Ashenfelter, under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). We previously blogged on these decisions here and here.

The Decision

The defendants’ challenge to the plaintiffs’ motion for class certification focused almost exclusively on the predominance requirement of Fed. R. Civ. Pro.  23(b)(3) – i.e., that questions of law or fact common to the class members predominate over any questions affecting only individual members. Id. at *22-23. According to the Court, defendants’ principal argument in this respect was that plaintiffs could not demonstrate, with proof common to the class, that each of the class members suffered injury in fact as a result of the alleged antitrust violation. Id. at *31-32.

Plaintiffs’ theory of damages in the case, both fact of injury and amount,  relied exclusively upon the expert testimony of Dr. Ashenfelter. Id. at *24. Dr. Ashenfelter proposed to show the wages that class members would have earned had there been no conspiracy to unlawfully exchange wage data (the “but-for” wages) by using a “benchmark” methodology comparing the wages paid to RNs to what the hospitals paid for registered nurses supplied by temporary agencies. Id. at *45-46. Among their challenges, defendants argued that Dr. Ashenfelter’s opinion improperly adopted a “one-size-fits-all” approach that disregarded the wide range of wages actually paid to the members of the RN class and disregarded the myriad factors, such as experience, specialized skills and department, that contribute to the wage disparities. Id. at *47. Dr. Ashenfelter himself conceded that his methodology measured only the “generic” nursing services provided by agency nurses and that it may result in understating the losses of experienced nurses. Id. at *47-48. The Court, however, rejected defendants’ argument, agreeing with plaintiffs that Dr. Ashenfelter’s opinion created a jury question concerning whether his benchmark approach provided a conservative estimate of the wages that all or nearly all class members would have earned but-for the alleged unlawful wage exchange.

The Court also cursorily rejected the defendants’ argument that Dr. Ashenfelter’s benchmark analysis could not, on a class-wide basis, demonstrate the amount of damages suffered by all or nearly all class members. The Court characterized defendants’ argument in this respect as merely a rehash of its “one-size-fits-all” argument that it had rejected in connection with the defendants’ challenge to the plaintiffs attempted showing of injury in fact. Id. at *67.

Issues And Implications For Employers

As he did in denying the defendants’ Daubert motion, Judge Rosen once again refused to resolve issues involving a “battle of the experts.” Instead, he concluded that defendants’ challenges to Dr. Ashenfelter’s opinions are issues for the jury to decide. At the class certification stage, there is at least some question as to whether these issues must be decided by the court if they are material to the question of whether a class should be certified. See Ellis v. Costco Wholesale Corporation, 657 F.3d 970, 982-84 (9th Cir. 2011) (rigorous analysis requires consideration of the persuasiveness of differing expert testimony on class issues, not just whether the testimony is admissible). There is also a significant question as to whether the use of Dr. Ashenfelter’s opinion is consistent with plaintiffs’ fiduciary duty to all class members when they concede that his methodology may result in understating losses of experienced nurses.  Id. at *47-48.  See Standard Fire Insurance Co., v. Knowles, ____ U.S. ___, 133 S.Ct. 1345, 1349 (2013) (noting that a court might find the plaintiff to be in an adequate representative due to the artificial cap he purported to impose on the class’ recovery).

But assuming this decision overcomes any subsequent challenge, it creates a significant risk for employers, particularly in the healthcare industry, that engage in the exchange of wage information in ways not sanctioned by the DOT/FTC Statements.  This is the first of the five nearly identical cases filed against hospitals in 2006 alleging an unlawful exchange of RN wage data in which the court certified a class of RNs on the issues of antitrust impact and damages. With the prospect of treble damages under the antitrust laws and large potential classes, plaintiffs’ attorneys, armed with this decision, will have an enormous incentive to pursue these types of claims in the future. Thus, employers are encouraged to examine their policies and practices regarding the exchange of wage and benefit information to ensure that they are consistent with the DOJ/FTC Statements which have previously been outlined in this blog here.