In stunning, back-to-back setbacks for the Antitrust Division of the US Department of Justice (DOJ) and its promised efforts to pursue employer agreements that restrain labour markets, in April 2022, two separate juries acquitted:
- two individual defendants in the DOJ's "wage fixing" case; and
- a company DaVita and its former CEO in the DOJ's "employee allocation" case.
These results do not appear to have slowed the DOJ's efforts in pursuing such cases but it remains to be seen whether they will discourage private litigation following on from these cases or other cases that pursue similar alleged restraints.
More importantly, one thing is certain: those currently litigating or under investigation for employment restraints will undoubtedly be encouraged to stick with their defences rather than to compromise and settle.
While the two cases are theoretically distinct, they do share several common threads: the restraints alleged by the DOJ are styled as classic, per se illegal antitrust violations that the DOJ regularly prosecutes as felonies, just as if they had been undertaken by the sellers in a traditional product market. However, as they are directed at the buyer side, the cases were novel in the sense that the courts did not have extensive experience with either type. This can be seen by comparing the jury instructions:
- In the "wage fixing" case,(1) the court used traditional "price-fixing" jury instructions.
- In the "employee allocation" case,(2) the court felt the need to customise the instructions given to address the novelty of the situation.
In both cases, the DOJ won key rulings:
- In the "wage fixing" case,(3) the court ruled that the price-fixing is to be broadly construed and includes buyers and sellers.
- In the "employee allocation" case,(4) the court rejected defendants' motion to dismiss the case, ruling that a lack of precedent does not establish legality.
The DOJ has proclaimed that these rulings are more important than the jury losses, as it will be able to use them in future cases. Asked about the losses at a University of Chicago conference, Jonathan Kanter, the head of the DOJ, made clear that the department considers the cases to be wins because they survived motions to dismiss and established that "harm to workers is an antitrust harm". In his prepared remarks, Kanter said that it was the DOJ's duty to litigate cases to protect competition: "Congress designed antitrust law to play out in the courts, before judges and juries in an open forum".
The DOJ's "wage fixing" case, United States v Jindal, involved an alleged short-term (ie, five to six months) agreement by the owner of a small physical therapy staffing company with a competitor to reduce the wages that they paid to physical therapists and physical therapy assistants in the Dallas-Fort Worth metropolitan area. The DOJ had very strong evidence of the alleged agreement – there were texts exchanged between the two principal alleged coconspirators that appeared to demonstrate the desire to reduce physical therapist wages.
The "market allocation" case, United States v DaVita Inc, involved alleged agreements with corporate competitors for outpatient medical care facilities "not to solicit each other's senior-level employees across the country." However, this case was slightly more complicated than Jindal in the sense that the "agreement" was not a classic "market allocation" where one competitor agreed not to hire from the other. Instead, the agreement appeared to be one in which each company agreed not to be the one to reach out to solicit another's senior employee. DaVita and its former CEO were the first to go to trial; another co-conspirator corporate defendant is awaiting trial.(5)
For further details please see "Antitrust indictments for employer restraints against employees".
While it is always virtually impossible to draw broad conclusions from jury verdicts (because juries are less predictable and the specific basis for any verdict is difficult to know), there do seem to be several key lessons:
- As noted, instructing the jury where there is not extensive precedent is difficult. The judge in the DaVita case appears to have struggled with an appropriate instruction to the jury, and the jury had a question about the meaning of a critical phrase of that instruction.
- The jury's impressions about the severity of the crime can be critical. Based on questions that the DaVita jury asked during testimony, the jury seemed concerned that the alleged non-solicitation agreement lacked market impact since the senior level executives could still pursue employment opportunities without requiring a solicitation from the alleged coconspirators. In addition, the notice to DaVita that the employees were required to provide if they were solicited for another position may have served to better the employee's negotiation position with DaVita.
- The DOJ may want to rethink its approach to trying individuals. In the DaVita case, it tried the corporation and an individual executive at the same time; in the Jindal case, it tried the individuals but not the offending entity. Juries may react quite differently to the consequences of guilty verdicts where they may not appreciate the severity of the alleged crime. Individuals go to jail but a corporation or other entity faces a fine and a jury may therefore be hesitant to convict the individual. Moreover, in the DaVita case, the trial of the corporation and the individual together apparently allowed the defence to split opening arguments – once at the outset of the trial and once at the outset of the defendants' case. This is highly unusual but can be an effective way to reset the jury after the close of the prosecution's case.
- Witnesses testifying under immunity may not be particularly compelling for a jury; the defence in the Jindal case apparently strongly undermined the government's lead witness who apparently shifted her story somewhat between her original interviews with the Federal Trade Commission and trial. In DaVita, virtually all of the witnesses for the government were testifying pursuant to immunity. It is widely known that persons attempting to gain immunity from prosecution are willing to "bend their stories" to fit the prosecutor's desire.
Acquittals in criminal antitrust cases are somewhat unusual because the DOJ typically has overwhelming evidence of the alleged antitrust crime and there can be a sense of moral outrage over the traditional crime of price-fixing. However, in these two recent cases, doubt surrounds both the strength of the DOJ's "conspiracy" evidence and the fact that the juries may have lacked the moral outrage that can be associated with agreements to increase prices.
Either way, the DOJ will be forced to spend some time assessing where it stands on the chief of the Antitrust Division's recent promise that:
[p]rotecting competition in labor markets is fundamental to the ability of workers to earn just rewards for their work…and it will continue to receive extraordinary vigilance from the Antitrust Division.(6)
More broadly, the DOJ may want to reassess its criminal enforcement programme, particularly in light of these losses and a judge's insistence that the Antitrust Division chief appear before him if the DOJ wants to try the executives of several poultry companies a third time, after the first two jury trials resulted in mistrials.
For example, the DOJ might consider bringing one or two civil injunctive cases to establish broader precedents on employer wage fixing and market allocation agreements. It may also want to reassess its trial preparation techniques more broadly, as a changing story by a key witness will undermine a case brought by anyone, public or private. It is interesting to note in this regard that DOJ has dropped several executive defendants from its poultry trial, presumably based on a belief that it has stronger cases against the remaining defendants. The defence bar will await any such changes anxiously because, in the meantime, criminal antitrust defendants will be more likely to seek vindication at trial.
For further information on this topic please contact W Todd Miller or Donald I Baker at Baker & Miller PLLC by telephone (+1 202 663 7820) or email ([email protected] or [email protected]). The Baker & Miller PLLC website can be accessed at bakerandmiller.com.
(1) Jury Instructions, United States v Jindal, No. 4:20-CR-00358 (Eastern District of Texas, 14 April 2022), ECF No. 111.
(2) Jury Instructions, United States v DaVita Inc, No. 21-cr-0229-RBJ (District of Colorado, 8 April 2022), ECF No. 242.
(3) Memorandum opinion and order, United States v Jindal, No. 4:20-CR-00358 (Eastern District of Texas, 29 November 2021), ECF No. 56.
(4) Order denying defendant' motion to dismiss, United States v DaVita Inc, No. 21-cr-0229-RBJ (District of Colorado, 28 January 2022), ECF No. 132.
(5) Order on parties' joint motion regarding case schedule, United States v Surgical Care Affiliates LLC, No. 3:21-CR-00011-L (Northern District of Texas, 8 March 2022), ECF No. 108.
(6) DOJ press release Departments of Justice and Labor Strengthen Partnership to Protect Workers (10 March 2022).