A WilmerHale team led by Partner John Walsh and former Counsel Daniel Crump, working closely with lawyers from Morgan Lewis Bockius, achieved a landmark, precedent-setting trial victory for our client DaVita, Inc in the first-ever trial of a criminal labor market allocation case brought by the US Department of Justice.
On April 15, 2022, after a two-week trial and two days of deliberation, a federal jury in Denver acquitted both the company and its former chief executive officer Kent Thiry on all charges -- three counts of criminal conspiracy to violate the Sherman Anti-Trust Act.
The stakes were extremely high. DaVita faced fines of up to $100 million per count while Thiry faced a maximum penalty of 10 years in prison and a $1 million fine per count.
This closely watched federal trial was the first involving a company or individual criminally charged for so-called “no poach” labor agreements under the 132-year-old Sherman Anti-Trust Act.
The acquittals in United States v. DaVita, Inc. et al., came a day after DOJ’s loss in United States v. Neeraj Jindal et al., a first-of-its-kind wage-fixing case in Sherman, Texas.
Both DaVita and Jindal represented defeats in the first labor market cases that the DOJ has brought to trial since its October 2016 announcement that it would seek to prosecute criminally not only wage fixing agreements, but also non-solicitation and no-hire agreements (often referred together as “no-poach” agreements) as market allocation agreements.
Prosecutors in the DaVita case claimed that “gentlemen’s agreements” between DaVita, Thiry and three other healthcare firms not to solicit DaVita’s employees, though not prohibiting recruitment, amounted to “allocating” the market for employees among the companies.
By arguing that DaVita and Thiry never intended to allocate the market for employees and highlighting the fact that employees actually did transfer between various companies throughout the alleged conspiracy, WilmerHale and DaVita co-counsel, led by Jack Dodds of Morgan Lewis, along with Thiry’s legal team, were able to secure a first-ever victory in these uncharted waters.
Partner Seth Waxman and Counsel David Lehn, laid the foundation for the victory by briefing and arguing a motion to dismiss the indictment in its entirety. They argued that the companies’ agreement to not proactively solicit employees from each other was not per se violation of the antitrust laws. The government agreed that if the court sided with the argument that no per se violation existed, the indictment would have to be dismissed.
US District Judge Brooke Jackson for the District of Colorado ruled against the motion to dismiss but set groundbreaking legal parameters for the novel charges. He found that not all non-solicitation agreements are per se violations; just those meant to allocate the market for employees were. Such agreements would be characterized by ending meaningful competition, the judge said.
Those limits formed the basis for evidentiary rulings and jury instructions that made the legal ground on which the courtroom battle was fought less forbidding for the defense, despite the long odds created by challenging facts, namely many arguably incriminating texts and emails between company executives.
The crucial importance of the WilmerHale team’s success in narrowing what constituted criminal behavior related to non-solicitation agreements was driven home by the one substantive question the jury asked during deliberation: “Can you give us a definition of meaningful competition?”
“Because the government chose to bring this criminal case on a legal theory that had never before been presented to a jury in any case, civil or criminal, the jury instructions in this case were a central battlefield,” Walsh said.
“That fight continued in the midst of trial, with competing briefs and arguments presented at night, through a weekend, and in the charging conference the day before closing arguments. Judge Jackson gave neither side all they wanted, but in the end, we persuaded him on the crucial instructions that gave the defense a path to victory.”
WilmerHale’s team also served as a constant “safety net” on legal and witness issues for the entire joint defense group of five law firms, providing critical factual and legal research assistance throughout the trial.
The victory was so resounding and noteworthy, and the lawyering so impressive, Litigation Daily, an American Legal Media publication, jointly recognized the two firms representing DaVita and three representing Thiry as Litigators of the Week.
Asked by Global Competition Review for his takeaways from the case, Walsh, a former prosecutor who remains the longest-serving US Attorney to serve Colorado, said: “Antitrust law is abstract. It’s complex… What jumps out so forcefully is that the law is unclear here and it is not appropriate to be using criminal prosecutions to try to clarify the law… It’s not fair to the people who are on the receiving side of the indictments.”
Besides Walsh and Crump, the WilmerHale trial team included senior associates Margarita Botero, Sophie Cooper, Lauren Ige, Erin Ladd, and Kelsey Quigley, associates Avi Bakshani and Aretha Frazier. Partners Thomas Mueller and David Ogden also provided vital guidance on key issues.