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Eastern District Of Virginia Rejects Allegations Of Fraudulent Concealment And Dismisses No-Poach Case As Time-Barred
05/07/2024On April 19, 2024, Judge Anthony Trenga of the United States District Court for the Eastern District of Virginia granted a motion to dismiss an antitrust class action against several shipbuilding companies who supply the U.S miliary. The action was brought on behalf of a putative class of persons employed as naval architects or marine engineers by defendants. Plaintiffs alleged that defendants violated Section 1 of the Sherman Act by allegedly entering into an unwritten agreement not to affirmatively recruit one another’s naval engineers or architects. The Court ultimately concluded that the claims were barred by the Sherman Act’s four-year statute of limitations, and accordingly dismissed the action in its entirety. Scharpf, et al. v. General Dynamics Corp. et al., No. 123CV01372AJTWEF, 2024 WL 1704665 (E.D. Va. Apr. 19, 2024).
The Court began by observing that the named plaintiffs’ employment in the alleged relevant market—persons employed as naval architects and/or marine engineers in the United States by defendants—ended no later than 2013. The Court thus explained that “[t]he expiration of the Sherman Act’s applicable four-year statute of limitations … without any tolling,” was “clear from the face of the Complaint.”
To try to avoid dismissal on this basis, plaintiffs contended that “the Complaint sufficiently alleges fraudulent concealment to toll the statute of limitations.”In particular, plaintiffs alleged that defendants concealed their alleged agreement by (1) agreeing to keep the alleged agreement secret; (2) making representations that they offer “competitive” compensation; (3) making general statements that they comply with antitrust laws and are essentially law-abiding and ethical; and (4) “includ[ing] non-solicitation clauses in teaming agreements as ‘cover’” for the allegedly unlawful no-poach scheme.
As the Court explained, to plead fraudulent concealment, plaintiffs must sufficiently allege that (1) defendants fraudulently concealed facts which are the basis of a claim, and that (2) plaintiffs failed to discover those facts within the statutory period, despite (3) the exercise of due diligence (citing Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 218 (4th Cir. 1987)). The Court held that none of the alleged activities described above constituted fraudulent concealment, and therefore did not reach the other two elements.
To plausibly allege the fraudulent concealment element, the Court held that a plaintiff must plead that a defendant engaged in active misconduct to cover up its allegedly unlawful activity, not merely that it “fail[ed] to own up to illegal conduct.” Most of the conduct that plaintiffs alleged to constitute concealment, including generic statements about offering competitive salaries and complying with the law, was rejected by the Court on this basis because plaintiffs did not allege any active efforts among defendants to conceal the alleged agreement.
As to the alleged teaming agreements, the Court found that the alleged no-hire clauses in those agreements were not shams that were concealing a separate unlawful agreement because those provisions “plainly serve the presumably valid purpose of prohibiting solicitation for the duration of a teaming agreement.” While plaintiffs colorfully asserted that the “teaming agreement tail wags the no-poach dog,” the Court concluded that plaintiffs’ “no-poach dog won’t hunt.” Accordingly, plaintiffs had no basis to toll the applicable four-year statute of limitations, rendering their claims time barred.
