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DOJ Reaffirms Per Se Opposition to No-Poach Agreements in Statement of Interest in Class Action Lawsuit

Posted  February 20, 2019
By James J. Kovacs

The U.S. Department of Justice (“DOJ”) has once again exhibited its recent interest in policing so-called “no-poach” agreements with the filing of a statement of interest, under 28 U.S.C. § 517, in a private class action antitrust lawsuit.

The statement of interest filed by the DOJ on February 9, 2019, in the case of In Re: Railway Industry Employee No-Poach Antitrust Litigation, MDL No. 2850 (W.D. Penn.), reaffirms DOJ’s position that naked “no-poach” agreements among competitors, i.e., agreements to not solicit or hire each other’s employees, are per se violations of the antitrust laws.  The DOJ’s intervention into the private plaintiffs’ lawsuit reiterates the DOJ’s continuing desire to promote and shape the antitrust laws based on its current enforcement agenda.  When coupled with private litigation, such interventions can dramatically improve a plaintiff’s chance of success.

Procedural History

Less than a year-ago, on April 3, 2018, the DOJ filed a complaint against Knorr-Bremse  (“Knorr”), Westinghouse Air Brake Technologies Corporation (“Wabtec”), and Wabtec-acquired Faiveley Transport S.A. (“Faiveley”).  The antitrust complaint alleged that the defendants, competitors in the supply of rail equipment used for freight and passenger railways, entered into unlawful agreements “not to solicit, recruit, hire without prior approval, or otherwise compete for employees.”  From 2009 to 2015, the various no-poach agreements between Wabtec and Knorr, Knorr and Faiveley, and Wabtec and Faiveley were enforced by the three companies’ senior management.  As part of its complaint, the DOJ alleged that such no-poach agreements were “per se unlawful under Section 1 of the Sherman Act.”  On the same day as the complaint was filed, DOJ and the defendants entered into a consent decree in which the defendants were prohibited from utilizing or enforcing no-poach agreements moving forward.  The DOJ promoted its victory over the defendants as part of its ongoing crackdown on naked no-poach agreements that impact employees in various labor markets.

Shortly thereafter, the class action plaintiffs, former employees of each of the three defendants in the DOJ proceeding, filed suit.  In November 2018, the defendants sought to dismiss the case, arguing, in part, that the appropriate antitrust standard in a no-poach/no-hire case is a rule of reason analysis.  Application of the rule of reason analysis in the case would allow the jury to weigh any anticompetitive effects or procompetitive benefits of the alleged conduct.

DOJ’s Statement of Interest

The DOJ’s statement of interest seeks to rebut defendants’ contention that the alleged conduct should be governed by a rule of reason analysis.  In rebutting defendants’ arguments, the DOJ makes clear that the United States considers a naked no-poach agreement akin to an agreement among competitors to “allocate customers or divide product markets,” and thus a per se violation of the antitrust laws.  In distinguishing Third Circuit case law cited by the defendants, the DOJ noted that those cases, including Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001), involved no-hire agreements that were “ancillary to a separate legitimate transaction or collaboration.” Moreover, the DOJ supported the plaintiffs’ plead allegations arguing that “naked no poach agreements are sufficient to state a per se claim under Section 1 of the Sherman Act because they allege a form of allocation agreement that—like other types of allocation agreements—have been recognized as per se unlawful.”  On February 13, 2019, the defendants, as part of their reply brief to the motion dismiss, responded to DOJ’s arguments by noting that “[a]s an enforcer often acting in the role of antitrust plaintiff, DOJ’s policy preference for a lower pleading standard is not surprising,” and stating that the district court need not “adopt the legal standard the DOJ advocates.”

Conclusion

As part of its continuing efforts to eliminate naked no-poach arrangements between competitors, the DOJ seeks to ensure that the courts are aware of the per se nature of such anticompetitive agreements.  For the plaintiffs in the class action lawsuit, the DOJ’s keen interest in ensuring the courts apply the per se standard unequivocally improved the plaintiffs standing and likelihood of success before the district court.

As indicated by this action, the DOJ has the option of wading into private litigation with statements of interest to ensure that courts apply its views of the law, particularly when the DOJ has a continuing enforcement interest over an area of conduct.  Potential plaintiffs (and defendants) should take notice of this recent intervention and be keenly aware of the DOJ’s litigation interests moving forward.

Edited by Gary J. Malone

 

Tagged in: Antitrust Enforcement,

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