Plaintiffs’ No Poach Class Claims Run Off The Rails
On June 20, 2019, Judge Joy Flowers Conti of the Western District of Pennsylvania dismissed plaintiffs’ class claims that defendant employers colluded to suppress market wages by agreeing not to hire each other’s employees. The Court found that the complaint failed to adequately plead that all or nearly all employees in the proposed class were harmed by the alleged collusion. In re Railway Industry Employee No-Poach Antitrust Litigation, No. 18-798 (W.D. Pa. June 20, 2019). The Court, however, acknowledged plaintiffs had sufficiently pled the existence of an overarching conspiracy among defendants from 2014 to 2016 and individual agreements among each of the three defendants beginning at different times since 2009. Since the class claims were dismissed without prejudice, plaintiffs have the opportunity to remedy their class-related pleading defects.
The class claims, brought under Section 1 of the Sherman Act, included allegations that defendants had enforced naked agreements not to hire one another’s employees. The complaint’s theory of harm was that these alleged no-poach agreements suppressed industry wages by preventing the dominant industry employers from bidding on employees who had previously been able to move between firms. As a result, putative class members would have been earning higher wages absent the illegal agreements. Taking plaintiffs’ allegations as true, the Court found the alleged no-poach agreements amounted to per se violations of Section 1. The Department of Justice (“DOJ”), after reaching its own settlement with defendants, participated at different hearings prior to defendants’ motion to dismiss and supported application of the per se rule to defendants’ agreements.
Still, the Court found plaintiffs did not meet Federal Rule of Civil Procedure 23’s predominance requirement, which requires plaintiffs to plead and prove that “questions of law or fact common to class members predominate over any questions affecting only individual members.” That is, plaintiffs must establish that the common issues of the class can be resolved without being overwhelmed by individualized issues of each putative class member. The Court here found that plaintiffs failed to plead sufficient facts alleging that defendants’ conspiracies impacted all class members, and instead found that issues specific to different subclasses were likely to predominate over issues common to the class as a whole. The Court noted, for instance, that while plaintiffs pled sufficient facts to suggest a conspiracy with respect to more skilled laborers, facts were not presented to indicate that the conspiracy encompassed an agreement not to poach lesser skilled employees, such as janitorial staff, who were also included within the proposed class. The Court’s finding that the no-poach agreements were per se violations of the Sherman Act did not take the place of an analysis concerning the predominance issue under Rule 23.
The In re Railway Employee No-Poach decision is the latest in a series of judicial opinions finding naked horizontal no-poach agreements among competitors to be per se illegal. But, importantly, the decision does nothing to upset the balance of those cases where the no-poach agreements are ancillary to legitimate joint ventures or otherwise procompetitive cooperative activity. The decision also makes clear that the per se impermissibility of the agreements does not automatically lead to a grant of class certification. Instead, plaintiffs still need to plead and prove that common issues predominate over individualized issues. This is instructive because it ensures that courts continue to conduct the “rigorous analysis” required by Walmart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and its progeny, before it can certify a Rule 23(b)(3) class. While a per se ruling may establish an element of plaintiffs’ claims, it does not guarantee class certification.