The U.S. District Court for the Northern District of Texas recently granted the U.S. Department of Justice’s (“DOJ”) motion to dismiss the criminal charges it had previously brought against Surgical Care Affiliates, LLC and SCAI Holdings, LLC (collectively “SCA”).
Those charges had been filed in 2021 alleging that SCA, which owns and operates outpatient medical care centers, had conspired to restrain trade in violation of Section 1 of the Sherman Act by agreeing with competitors not to solicit each other’s senior-level employees – a “no-poach” agreement.
The dismissal comes in the aftermath of the DOJ having previously lost four other criminal cases involving either no-poach or wage-fixing agreements, and also in the aftermath of the issuance by the DOJ and the Federal Trade Commission (the “Agencies”) of a guidance document titled “Antitrust Guidance for Human Resource Professionals.”
In that guidance issued in October 2016, the Agencies categorically stated that “[a]greements among employers not to recruit certain employees or not to compete on terms of compensation are illegal.” It further provided that “[g]oing forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.” In other words, wage-fixing and no-poach agreements were henceforth to be treated as per se violations of the Sherman Act.
The Other Cases
Prior to the indictment of SCA, in U.S. v. Jindal, the DOJ had indicted the former owner of a physical therapy staffing company and one of his colleagues alleging that they had violated Section 1 of the Sherman Act by agreeing with a competitor to pay lower wage rates to certain physical therapists and physical therapist assistants. Following a jury trial, both the owner and his colleague were acquitted of the wage-fixing charges.
Following the indictment of SCA, the DOJ brought three other criminal cases to trial and lost each of them.
In U.S. v. DaVita, the DOJ charged the dialysis provider DaVita and its former CEO with being SCA’s co-conspirators in the allegedly illegal no-poach scheme. At the end of the trial, the defendants were acquitted.
In U.S. v. Manahe, the DOJ indicted managers of home healthcare agencies in Maine alleging that they had conspired to fix the rates their agencies paid personal support specialists and not to solicit each other’s workers. The district court denied the defendants’ motion to dismiss following which they were acquitted by the jury.
In U.S. v. Patel, employees of an aerospace company were accused of conspiring with the company’s suppliers of outsourced labor to enter into a no-poach agreement that allegedly constituted a per se violation of Section 1 of the Sherman Act. At the conclusion of the trial, the defendants filed a motion for judgment of acquittal which was granted by the U.S. District Court for the District of Connecticut.
Significantly, in granting the motion, the court acknowledged that market allocations along with price fixing and bid rigging are subject to per se treatment, but went on to state that “not all no poach agreements are market allocations subject to per se treatment and therefore, determining whether a no poach agreement is a market allocation is highly fact specific.”
According to the court, in order to constitute an illegal market allocation, there must be an agreement that “meaningfully allocates” the market, and in this case the alleged agreement had “so many exceptions” and there were a sufficient number of instances in which employees “were hired between and among the supplier companies” that there was no meaningful allocation and, accordingly, no market allocation justifying per se treatment.
In its motion seeking dismissal in the SCA case, the DOJ did not explain its reasons for the dismissal simply stating that: “Dismissal of this case is not contrary to manifest public interest, and it will allow the conservation of this Court’s time and resources.”
Interestingly, following the acquittal in the Jindal case, the DOJ had commented: “In no way should the verdict today be taken as a referendum on the Antitrust Division’s commitment to prosecuting labor market collusion.” Following the acquittal in DaVita, the DOJ had stated that: “While we are disappointed in the outcome, we respect the jury’s decision and remain committed to enforcing the antitrust laws in the labor markets.”
There has been some speculation that the SCA dismissal was prompted by concerns on the part of the DOJ about the possible widening impact of the Patel court’s application of the per se rule. That said, the DOJ is currently prosecuting alleged wage-fixing in U.S. v. Eduardo Ruben Lopez, a case involving a health care staffing executive charged with conspiring with unnamed co-conspirators to fix the wages of Las Vegas nurses and thereby suppress and eliminate competition for their services.
In announcing the return of a superseding indictment in the Lopez case this past September, Assistant Attorney General Jonathan Kanter of the DOJ’s Antitrust Division stated that:
“Wage fixing hurts workers. … The Antitrust Division will aggressively investigate and prosecute wage-fixing conspiracies and any fraudulent conduct aimed at keeping the illicit profits of such conspiracies.”
 In October 2022, VDA OC LLC, a health care staffing company, pleaded guilty to entering into and engaging in a conspiracy with a competitor to allocate employee nurses and to fix the wages of those nurses in violation of Section 1 of the Sherman Act.