DaVita Acquittals Deal a Big Blow to DOJ 'Labor Market Cases'

One observer says the best way to address sketchy labor practices is through civil litigation, not criminal prosecutions.

The April 15 acquittal of conspiracy in restraint of trade charges against DaVita Inc. and its former CEO Kent Thiry should raise red flags for the U.S. Department of Justice that its unprecedented criminal prosecution of no-poaching agreements, wage-fixing, and other sketchy labor practices could be a hard sell for juries, one observer notes.

"Many of us in the defense bar have questioned the wisdom of the Antitrust Division's fixation on so called 'labor market cases' and resource expenditures to try to find and bring criminal no-poach cases," says Ann O'Brien, a former assistant chief of DOJ's Competition Policy & Advocacy Section, and now an attorney with BakerHostetler.

"What we are seeing in these trial defeats for the Antitrust Division is the culmination of a years-long effort to find 'labor market' cases and push the boundaries of Section 1 of the Sherman Act to criminalize conduct that has never before been treated as per se criminal conduct," said O'Brien. "Juries have spoken, as have judges in their jury instructions, and they do not agree."

"Defense counsel often put 'labor market' in quotes because people are not widgets and labor is not a proper antitrust market," O'Brien says.

"I question the wisdom of the Antitrust Division bringing no poach cases as criminal per se cases because for decades non-compete and non-solicit agreements have been analyzed as civil offenses under the rule of reason standard because there are often procompetitive benefits attendant to such agreements, which means they are not per se harmful. Context matters."

In U.S. vs. DaVita et al., the Denver-based kidney dialysis specialists and Thiry were charged in three separate conspiracies with rival healthcare companies to suppress competition for some employees from 2012 through June 2019.

O'Brien, who observed the trial, says prosecutors failed to show "beyond a reasonable doubt that the defendants entered into these alleged no poach agreements with the purpose of allocating the market."

"The defense conceded the agreement but hinged the defense on providing context, including strategic business reasons and friendships," O'Brien says. "The defense brought these issues out on cross and also were allowed to present an economist as an expert witness to provide opinions that the movement of employees and wage data was inconsistent with a market allocation agreement and did not result in the widespread harm the government theoretically alleged.

O'Brien says the jury appeared to focus on the context of the agreements and the expert testimony "and could not find that the purpose of the conceded agreements was to allocate the market as defined."

Since the DaVita case was brought forward in 2021, DOJ has filed another five no-poach cases, including one against Surgical Care Affiliates LLC, an alleged co-conspirator with DaVita. O'Brien doesn't believe that DOJ will have much success in those cases, either.

"Since 2016 the Antitrust Division has said prosecuting wage-fixing and no-poach cases is a top priority.  They do not seem ready to concede defeat or back down," O'Brien says. "But in the DaVita case the defendants conceded the agreement – typically the heart of an antitrust crime – and they did not win."

"There were defense victories in the DaVita case beyond the acquittals," she said. "The court's findings on the motion to dismiss and jury findings will be helpful to defendants in pending no poach cases."

Instead of criminal prosecution, O'Brien says DOJ should pursue civil charges, or press for legislative changes.

"The Antitrust Division should be thinking long and hard about its ability to win these cases and whether they should be brought under the principles of federal prosecution," she says.