UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF NORTH CAROLINA
_________________________________
)
DANIELLE SEAMAN, individually and
on behalf
of all others similarly situated,
Plaintiff,
v.
DUKE UNIVERSITY, et al.,
Defendants.
)
) Civil No. 1:15-cv-462
Judge Catherine C. Eagles
)
)
)
)
)
)
)
)
)
STATEMENT OF INTEREST OF THE UNITED STATES OF AMERICA
MATTHEW G.T. MARTIN
United States Attorney
LYNNE P. KLAUER
Assistant
U.S. Attorney
101 S. Edgeworth St., Fourth Floor
Greensboro, NC 27403
Tel: (336) 333-5351
MAKAN DELRAHIM
Assistant Attorney General
MICHAEL F. MURRAY
Deputy As
sistant Attorney General
WILLIAM J. RINNER
Chief of Staff and Senior Counsel
KRISTEN C. LIMARZI
NICKOLA
I G. LEVIN
Attorneys
U.S. Department of Justice
Antitrust Division
950 Pennsylvania Ave. NW #3224
Washington, DC 20530
Tel: (202) 514-2886
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .............................................................................................. iii
INTEREST OF THE UNITED STATES ............................................................................ 1
BACKGROUND ................................................................................................................. 2
ARGUMENT ....................................................................................................................... 4
I. Defendants Are Not Exempt From Antitrust Liability Under Parker .......... 6
A. UNCSM Is Not Ipso Facto Exempt .............................................................. 7
1. State Agencies Are Not Ipso Facto Exempt Under Parker ..................... 7
2. Ipso Facto Exemption Also Is Inapplicable Because UNCSM Acted
Purely as a Labor Market Participant, Not a Regulator ......................... 11
B. Midcal Is Not Satisfied ................................................................................ 14
1. North Carolina Has Not Clearly Articulated a Policy To Displace
Competition in Medical Faculty Hiring ................................................. 14
2. Active Supervision Is Required, But Absent Here ................................. 17
II. The Per Se Rule Applies To The Alleged No-Poach Agreement Unless
Duke Proves That It Is Reasonably Necessary To A Separate Legitimate
Collaboration With UNCSM ....................................................................... 19
A. Customer- and Market-Allocation Agreements Are Per Se Unlawful ....... 19
B. No-Poach Agreements Between Competing Employers Allocate
Employees Within A Labor Market ............................................................ 22
C. Ancillary No-Poach Agreements Are Not Per Se Unlawful ....................... 24
D. Duke’s Arguments For Applying The Full Rule Of Reason Lack Merit ... 25
CONCLUSION ................................................................................................................. 29
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TABLE OF AUTHORITIES
CASES
Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 (1899) ................................... 24
Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982) ................................ 26
Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic,
65 F.3d 1406 (7th Cir. 1995) .......................................................................................... 21
Board of Governors v. Helpingstine, 714 F. Supp. 167 (M.D.N.C. 1989) ....................... 10
Brooks v. Vassar, 462 F.3d 341 (4th Cir. 2006) ................................................................ 13
California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,
445 U.S. 97 (1980) ..................................................................................................... 5, 14
Camps Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520 U.S. 564 (1997) .... 13
Chamber of Commerce v. City of Seattle, 890 F.3d 769 (9th Cir. 2018) .................... 14, 15
City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991) ..................... 12
Cowboy Book, Ltd. v. Board of Regents, 728 F. Supp. 1518 (W.D. Okla. 1989) ............. 11
Deak-Perera Hawaii, Inc. v. Department of Transportation,
745 F. 2d 1281 (9th Cir. 1984) ................................................................................. 10, 11
Deslandes v. McDonald’s USA, LLC, 2018 WL 3105955 (N.D. Ill. June 25, 2018) . 25, 27
Edinboro College Park Apartments v. Edinboro University Foundation,
850 F.3d 567 (3d Cir. 2017) ........................................................................... 9, 10, 17, 18
Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001) .................................... 25, 26, 27, 29
FTC v. Phoebe Putney Health System, Inc., 568 U.S. 216 (2013) ............................. passim
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) ......................................................... 8
Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774 (7th Cir. 1994) ............................ 21
Hoover v. Ronwin, 466 U.S. 558 (1984) ......................................................................... 6, 7
Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976) ................................................. 13
In re High-Tech Employee Antitrust Litigation, 856 F. Supp. 2d 1103 (N.D. Cal. 2012) 23
Jefferson County Pharmaceutical Association, Inc. v. Abbott Labs.,
460 U.S. 150 (1984) ....................................................................................................... 13
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Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) ................... 20
Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290 (2d Cir. 2008) ... 24
N.C. State Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015) .................... passim
N.C. State Board of Dental Examiners v. FTC, 717 F.3d 359 (4th Cir. 2013) ................. 20
NCAA v. Board of Regents, 468 U.S. 85 (1984).......................................................... 27, 28
Nicholl v. Board of Regents, 2016 WL 9651773 (N.D. Ga. Nov. 30, 2016) .................... 11
Northwest Wholesale Stationers Inc. v. Pacific Stationary & Printing Co.,
472 U.S. 284 (1985) ....................................................................................................... 20
Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) ................................................. 20, 21
Parker v. Brown, 317 U.S. 341 (1943) ....................................................................... passim
Patrick v. Burget, 486 U.S. 94 (1988) ................................................................................. 6
Pharmaceutical & Diagnostic Services, Inc. v. University of Utah,
801 F. Supp. 508 (D. Utah 1990) ................................................................................... 11
Polk Brothers, Inc. v. Forest City Enterprises, Inc., 776 F.2d 185 (7th Cir. 1985) .......... 24
Reeves, Inc. v. Stake, 447 U.S. 429 (1980) ........................................................................ 13
Reid v. University of Minnesota, 107 F. Supp. 439 (N.D. Ohio 1952) ............................. 10
Rothery Storage & Van Co. v. Atlas Van Lines, Inc.,
792 F.2d 210, (D.C. Cir. 1986) ...................................................................................... 24
S.C. State Board of Dentistry v. FTC, 455 F.3d 436 (4th Cir. 2006) ........................ 6, 7, 10
Saenz v. University Interscholastic League, 487 F.2d 1026 (5th Cir. 1973) .................... 10
State Oil Co. v. Khan, 522 U.S. 3 (1997) .......................................................................... 20
Tanaka v. University of Southern California, 252 F.3d 1059 (9th Cir. 2001) .................. 28
Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) ............................................ 8, 19
Union Pacific Railway Co. v. United States, 313 U.S. 450 (1941) ................................... 12
United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898) ............................ 24
United States v. Brown University, 5 F.3d 658 (3d Cir. 1993) ......................................... 28
United States v. Brown, 936 F.2d 1042 (9th Cir. 1991) .............................................. 21, 22
United States v. Cadillac Overall Supply Co., 568 F.2d 1078 (5th Cir. 1978) ........... 21, 22
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United States v. Cooperative Theatres of Ohio, Inc.,
845 F.2d 1367 (6th Cir. 1988) .................................................................................. 20, 21
United States v. eBay, Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013) .......................... 23, 26
United States v. Goodman, 850 F.2d 1473 (11th Cir. 1988) ............................................. 22
United States v. Kemp & Associates, 907 F.3d 1264 (10th Cir. 2018) ............................. 21
United States v. Koppers Co., 652 F.2d 290 (2d Cir. 1981) .............................................. 22
United States v. Reicher, 983 F.2d 168 (10th Cir. 1992) .................................................. 21
United States v. Rockford Memorial Corp., 898 F.2d 1278 (7th Cir. 1990) ..................... 28
United States v. Suntar Roofing, Inc., 897 F.2d 469 (10th Cir. 1990) ........................ 21, 22
United States v. Turkette, 452 U.S. 576 (1981) ................................................................. 16
Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP,
540 U.S. 398 (2004) ....................................................................................................... 16
Weisfeld v. Sun Chemical Corp., 84 F. App’x 257 (3d Cir. 2004) .............................. 26, 27
Weisfeld v. Sun Chemical Corp., 210 F.R.D. 136 (D.N.J. 2002) ................................ 26, 27
Yi v. SK Bakeries, Inc., No. 18-5627 RJB (W.D. Wa. Nov. 13, 2018) ....................... 26, 27
STATUTES
15 U.S.C. § 1 ................................................................................................................. 1, 19
28 U.S.C. § 517 ............................................................................................................... 1, 3
N.C. Gen. Stat. § 116-1(a) ................................................................................................. 15
N.C. Gen. Stat. § 116-1(b) ................................................................................................. 15
N.C. Gen. Stat. § 116-11(11) ............................................................................................. 15
N.C. Gen. Stat. § 116-37(d) ......................................................................................... 15, 16
STATE CONSTITUTION
N.C. Const. art. III ............................................................................................................... 8
N.C. Const. art. V ................................................................................................................ 9
N.C. Const. art. VII.............................................................................................................. 8
N.C. Const. art. VIII ............................................................................................................ 9
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MISCELLANEOUS
1A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (4th ed. 2013) ...................... 8
12 Herbert Hovenkamp, Antitrust Law (3d ed. 2012) ....................................................... 26
Gregory J. Werden, Antitrust Analysis of Joint Ventures: An Overview,
66 Antitrust L.J. 701 (1998) ........................................................................................... 24
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INTEREST OF THE UNITED STATES
The United States respectfully submits this statement pursuant to 28 U.S.C. § 517,
which permits the Attorney General to direct any officer of the Department of Justice to
attend to the interests of the United States in any case pending in a federal court. The
United States has a strong interest in the correct application of the federal antitrust laws.
The United States has a particular interest in addressing the proper application of
the “state action” defense to liability under Parker v. Brown, 317 U.S. 341 (1943), and
the standard for judging the legality of alleged no-poach agreements under Section 1 of
the Sherman Act, 15 U.S.C. § 1. The United States has filed numerous briefs on the
“state action” doctrine. The United States also has repeatedly enforced the antitrust laws
against no-poach agreements, United States v. Knorr-Bremse AG, No. 18-cv-747, Final
Judgment, Doc. 19 (D.D.C. July 11, 2018); United States v. eBay, Inc., No. 12-cv-5869,
Final Judgment, Doc. 66 (N.D. Cal. Sept. 2, 2014); United States v. Adobe Sys., Inc., No.
1:10-cv-1629, Final Judgment, Doc. 17 (D.D.C. Mar. 18, 2011); United States v.
Lucasfilm Ltd., No. 1:10-cv-2220, Final Judgment, Doc. 6-1 (D.D.C. May 9, 2011), and
recently filed a statement of interest on the issue in In re Railway Industry Employee No-
Poach Antitrust Litigation, No. 2:18-mc-798 (W.D. Pa. Feb. 8, 2019) (Doc. 158).
The United States takes no position on the factual question of whether defendants
entered into a no-poach agreement. It does, however, urge the Court to reject defendants’
arguments that such an agreement would be exempt from antitrust liability under Parker
and must be analyzed under the full rule of reason.
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BACKGROUND
Dr. Danielle Seaman worked as an Assistant Professor of Radiology at Duke
School of Medicine in the Cardiothoracic Imaging Group. Second Amended Complaint
(SAC), Doc. 109, ¶ 52.
1
In February 2015, she contacted the Chief of Cardiothoracic
Imaging at University of North Carolina Chapel Hill School of Medicine (UNCSM) and
expressed interest in becoming a Thoracic Radiologist at UNCSM. Id. ¶ 56. The Chief
e-mailed her that she “would be a great fit” for UNCSM but “[u]nfortunately” the Dean’s
office confirmed “that lateral moves of faculty between Duke and UNC are not
permitted” because of a “‘guideline’ which was agreed upon between the deans of UNC
and Duke a few years back.” Id. ¶ 57. Under the guideline, “they would not hire each
other’s faculty in a lateral move [unless] there is an upward move, ie a promotion.” Id.
¶ 59.
Dr. Seaman filed a class action against Duke and UNC entities, alleging that this
“no-hire agreement” is a per se violation of Section 1 of the Sherman Act. SAC ¶¶ 9-18,
69-80. She alleged that, because “Duke/DUHS and UNC/UNC Health are the two largest
academic medical systems in North Carolina, and indeed two of the largest employers in
the state, their no-hire agreement has reduced competition for medical facility faculty and
certain staff, thereby suppressing faculty and staff pay.” Id. ¶ 2.
1
This statement relies on the SAC and public versions of briefs provided to the United
States. Under the case management order, Doc. 299, those briefs have not yet been
publicly filed.
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Defendants moved to dismiss the Section 1 claims under the “state action”
doctrine of Parker v. Brown, 317 U.S. 341 (1943). This Court denied the motions. The
UNC entities settled, “securing broad injunctive relief for the Settlement Class.” Doc.
185, at 3. The Court certified a “class composed of faculty members.” Doc. 189, at 24.
This Court set a comprehensive schedule for summary judgment briefing. Doc.
299. This Statement concerns those parts of the parties’ briefs addressing the “state
action” doctrine and the standard for judging the legality of the alleged no-hire
agreement.
2
The Duke Defendants (Duke) argue that they are entitled to summary judgment
because UNC “is a sovereign representative of the state” that is automatically exempt
under Parker. Duke Br. for Summ. Judg. on State Action Immunity (Duke SA Br.), at 1-
2, 12-15. Duke argues, in the alternative, that Section 1 does not apply because UNC
“was acting pursuant to a clearly articulated state policy” to displace competition in
“faculty hiring, compensation, and retention.” Id. at 1-2, 4-12. In contrast, plaintiffs
argue that Parker exemption is inapplicable because (i) UNC is not a sovereign actor
entitled to ipso facto immunity; (ii) North Carolina has a clear policy supporting
competition, not against it; (iii) the State never supervised the secret agreement; and (iv)
Parker applies only to state regulatory action, not market participation. Memo. In Supp.
of Pls. Mot. For Summ. Judg. Re: State Action Immunity Defense, at 4.
2
While 28 U.S.C. § 517 and the Federal Rules of Civil Procedure do not limit the length
of this statement, it approximates the length of these two parts. See Doc. 280.
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Although denying that it entered into a no-poach agreement, Duke argues that any
such agreement must be analyzed under the “full rule of reason,” rather than the per se
rule. Duke Br. on Application of the Rule of Reason Standard (Duke RoR Br.), at 1.
Duke argues that applying the per se rule to no-poach agreements is improper because it
would create a new per se category, id. at 1-4; because defendants are “not for profit
academic institutions,” id. at 4-6; and due to their need to “collaborate and support each
other,” id. at 8. Plaintiffs, by contrast, argue that the per se rule applies because the no-
poach agreement “is a classic market allocation agreement—a pernicious form of
collusion that has long been per se unlawful,” and Duke has not “identif[ied] a single
procompetitive collaboration with UNC requiring the no-poach agreement.” Pls. Opp. To
Duke RoR Br. at 1.
ARGUMENT
Duke’s expansive arguments on the “state action” doctrine and indulgent treatment
of no-poach agreements are not supported by precedent and risk significant harm to
competition, consumers, and workers in North Carolina. The United States urges the
Court to hold the following:
First, UNCSM is not ipso facto exempt from the Sherman Act. State agencies do
not “automatically qualify as that of the sovereign State” for state-action purposes. N.C.
State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101, 1111 (2015) (N.C. Dental). Thus,
as a state agency, ipso facto exemption does not apply to UNCSM. Ipso facto exemption
also is inapplicable here because, in entering into the no-poach agreement, UNCSM
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would be acting purely as a labor market participant, and not as a regulator. Duke’s
arguments to the contrary are unsound and could harm competition in markets where
state agencies are market participants.
Second, Duke cannot satisfy the applicable two-prong test for state-action
exemption under California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445
U.S. 97, 105 (1980) (Midcal): (i) that the State has clearly articulated a policy to allow
the anticompetitive conduct (clear articulation); and (ii) that the State has actively
supervised the anticompetitive conduct (active supervision). Duke cannot satisfy the first
Midcal prong because there is no policy by the North Carolina legislature to displace
competition in medical faculty hiring. Duke appears to concede that it cannot satisfy the
second Midcal prong, instead wrongly arguing that it does not apply. When a state
agency acts purely as a market participant, as UNCSM here, active supervision is
required for Parker exemption.
3
Third, courts have long held that customer- and market-allocation agreements
among competitors are per se unlawful. The alleged no-hire agreement is a market-
allocation agreement in a labor market. As with other allocation agreements, it is per se
unlawful unless the facts show that it is reasonably necessary to a separate, legitimate
collaboration between Duke and UNC. Duke cannot establish such reasonably necessity
while also arguing the agreement never existed.
3
Because UNC is not exempt under Parker, we do not address Duke’s argument that
“UNC’s immunity applies to Duke.” Duke SA Br. 15.
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I. Defendants Are Not Exempt From Antitrust Liability Under Parker
In Parker, the Supreme Court “interpreted the antitrust laws to confer [implied]
immunity on anticompetitive conduct by the States when acting in their sovereign
capacity.” N.C. Dental, 135 S. Ct. at 1110. This is often called “state-action immunity,”
id., though it is more accurately described as an “exemption” from the antitrust laws
rather than an “immunity from suit.” S.C. State Bd. of Dentistry v. FTC, 455 F.3d 436,
445-46 (4th Cir. 2006) (S.C. Dentistry).
The state-action defense is limited. “Federal Antitrust law is a central safeguard
for the Nation’s free market structures” and “as important to the preservation of
economic freedom and our free-enterprise system as the Bill of Rights is to the protection
of our fundamental personal freedoms.” N.C. Dental, 135 S. Ct. at 1109. “Given the
fundamental national values of free enterprise and economic competition that are
embodied in the federal antitrust laws, state action immunity is disfavored, much as are
repeals by implication.” Id. at 1110.
The state-action defense applies only “when it is clear that the challenged
anticompetitive conduct is undertaken pursuant to a regulatory scheme that ‘is the State’s
own.’” FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 225 (2013) (citation
omitted); see also Patrick v. Burget, 486 U.S. 94, 100 (1988) (the challenged conduct
must be “truly the product of state regulation”). Thus, state legislation and a “decision of
a state supreme court acting legislatively rather than judicially” “ipso facto are exempt
from operation of the antitrust laws” under the “state-action doctrine.” Hoover v.
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Ronwin, 466 U.S. 558, 567-68 (1984). Yet “[c]loser analysis is required when the
activity at issue is not directly that of the legislature or supreme court, but is carried out
by others pursuant to state authorization.” Id. at 568 (footnote omitted). The two Midcal
factors—clear articulation and active supervision—ensure the challenged anticompetitive
activity is “indeed the policy of a State.” N.C. Dental, 135 S. Ct. at 1111-12.
A. UNCSM Is Not Ipso Facto Exempt
Unlike state legislatures and state supreme courts acting legislatively, UNC is not
a sovereign actor for Parker purposes. Duke’s arguments for extending ipso facto
exemption to UNC are unavailing.
1. State Agencies Are Not Ipso Facto Exempt Under Parker
N.C. Dental makes clear that state agencies are not ipso facto exempt from
antitrust liability for their anticompetitive conduct. The Supreme Court emphasized that
it has recognized ipso facto exemption only for state legislation and decisions of a state
supreme court acting legislatively, and explained that both “automatically qualify” as
state action under Parker because “they are an undoubted exercise of state sovereign
authority.” 135 S. Ct. at 1110-11.
4
While lower court decisions before N.C. Dental had
“extend[ed] the ipso facto Parker exemption to executive officers and agencies,” S.C.
Dentistry, 455 F.3d at 442 n.6, the Supreme Court in N.C. Dental held that “[s]tate
agencies are not simply by their governmental character sovereign actors for purposes of
4
Hoover reserved judgment on whether a governor is ipso facto exempt. 466 U.S. at 568
n.17; S.C. Dentistry, 455 F.3d at 442 n.6. We take no position on the issue here.
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state-action immunity.” 135 S. Ct. at 1111; see also Goldfarb v. Va. State Bar, 421 U.S.
773, 791 (1975) (“The fact that the State Bar is a state agency for some limited purposes
does not create an antitrust shield that allows it to foster anticompetitive practices for the
benefit of its members”); 1A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law
¶ 221c, at 53 (4th ed. 2013) (“the antitrust immunity established in Parker does not
extend to every transaction or activity in which a state is involved”). Rather, for state
agencies engaged in anticompetitive conduct, courts must ensure the conduct truly
represents State policy, which is “necessary in light of Parker’s implied rationale to
ensure the States accept political accountability for the anticompetitive conduct they
permit and control.” N.C. Dental, 135 S. Ct. at 1111.
Duke’s argument that UNC “is a constitutional agency of the State of North
Carolina” enshrined “in the North Carolina Constitution,” Duke SA Br. 12, does not
establish ipso facto exemption under Parker because nothing in North Carolina’s
Constitution confers sovereign powers on UNC or implies its sovereignty for “purposes
of Parker,” N.C. Dental, 135 S. Ct. at 1111. North Carolina’s constitution also provides
for the creation of “administrative departments and agencies of the State,” N.C. Const.
art. III, § 5(10), but N.C. Dental squarely holds that “[s]tate agencies are not simply by
their governmental character sovereign actors for purposes of state-action immunity.”
135 S. Ct. at 1111. Its constitution also provides “for the organization and government
and the fixing of boundaries of counties, cities and towns,” N.C. Const. art. VII, §1, but
Town of Hallie v. City of Eau Claire, 471 U.S. 34, 38-39 (1985), holds that municipalities
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“are not themselves sovereign.” Finally, its constitution permits the creation of
corporations, N.C. Const. art. VIII, § 1, and seaport and airport facilities, id. art. V, § 13,
but such commercial enterprises lack any tinge of sovereign character.
Duke seeks to distinguish cases involving municipalities and political subdivisions
on the purported ground that they “serve only a portion of state,” while UNC pursues
“state-wide concerns.” Duke SA Br. 13. UNC’s jurisdiction, however, appears no more
“state-wide” than the state board of dental examiners, which N.C. Dental did not find
ipso facto exempt. In any event, this distinction does not matter. For Parker purposes, “a
nonsovereign actor is one whose conduct does not automatically qualify as that of the
sovereign State itself.” N.C. Dental, 135 S. Ct. at 1111. Conduct qualifies as such
automatically only when it is “an undoubted exercise of state sovereign authority.” Id. at
1110. Anticompetitive conduct by universities does not meet this requirement. Edinboro
College Park Apartments v. Edinboro Univ. Found., 850 F.3d 567, 576-77 (3d Cir.
2017).
Duke also wrongly suggests that UNCSM is ipso facto exempt because UNC is a
state actor for Eleventh Amendment purposes. Duke SA Br. 14. That an entity “is an
arm of the state under the Eleventh Amendment,” however, does not make it “‘sovereign’
for purposes of Parker.” Edinboro, 850 F.3d at 575. “Sovereign action for purposes of
direct Parker immunity is ‘qualitatively different’ from state action in more familiar
contexts,” such as “the Eleventh Amendment.” Id. (citation omitted). While in other
contexts, state action can cover “acts reflecting the discretion of individual officials,”
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state action “‘in antitrust adjudication refers only to . . . the state’s policies.’” Id. (citation
omitted); see also S.C. Dentistry, 455 F.3d at 446-47 (distinguishing Parker exemption
from Eleventh Amendment immunity).
Duke’s reliance on Board of Governors v. Helpingstine, 714 F. Supp. 167
(M.D.N.C. 1989), is misplaced because Helpingstine is not good law. First, Helpingstine
relies significantly on Reid v. University of Minnesota, 107 F. Supp. 439 (N.D. Ohio
1952), which it misread as holding the University of Minnesota Press “immune from suit
under the Sherman Act.” 714 F. Supp. at 175. Reid, however, held only that the court
lacked personal jurisdiction over the Press, and thus the court did “not feel called upon to
determine” if Parker protected the Press. 107 F. Supp. at 440-41, 443.
In addition, Helpingstine rests on several repudiated precedents, including Saenz v.
University Interscholastic League, 487 F.2d 1026, 1027-28 (5th Cir. 1973), and Deak-
Perera Hawaii, Inc. v. Department of Transportation, 745 F. 2d 1281 (9th Cir. 1984).
Saenz held Section 1 inapplicable to a state university because the court incorrectly
assumed all “governmental action” was exempt from the Sherman Act. 487 F.2d at 1028.
As the Third Circuit recently explained, that reasoning is inconsistent with N.C. Dental.
Edinboro, 850 F.3d at 578. Because “the analysis we are required to apply did not exist
at the time Saenz was decided,” the Third Circuit declined to follow Saenz and instead
“join[ed] those courts that have applied modern state-action principles to deny ipso facto
immunity to public universities.” Id. In Deak-Perera, the Ninth Circuit held that the
Hawaii Department of Transportation was sovereign if it was “operating within its
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constitutional and statutory authority.” 745 F.2d at 1283. Yet that reasoning was
repudiated by the Supreme Court in Phoebe Putney, which “ma[kes] clear that state-law
authority to act is insufficient to establish state-action immunity.” 568 U.S. at 228.
5
Thus, there is no legitimate basis to find a state agency like UNC ipso facto exempt from
antitrust liability under Parker.
2. Ipso Facto Exemption Also Is Inapplicable Because UNCSM
Acted Purely as a Labor Market Participant, Not a Regulator
Ipso facto exemption also does not apply for the additional reason that, in agreeing
with Duke not to hire each other’s medical faculty, UNCSM acted purely as a participant
in the labor market, not as a regulator. UNCSM was not performing an essentially
governmental function.
In Parker, the Court held that the antitrust laws do not apply when the
“sovereign[] imposed the restraint as an act of government,” such as when “[t]he state
itself exercises its legislative authority in making [a] regulation and in prescribing the
conditions of its application.” 317 U.S at 352. The Court distinguished a situation when
“the state or its municipality becom[es] a participant in a private agreement or
5
Duke also relies upon Nicholl v. Board of Regents, 2016 WL 9651773 (N.D. Ga. Nov.
30, 2016); Pharmaceutical & Diagnostic Services, Inc. v. University of Utah, 801 F.
Supp. 508 (D. Utah 1990), and Cowboy Book, Ltd. v. Board of Regents, 728 F. Supp.
1518 (W.D. Okla. 1989). Duke SA Br. 13. These cases relied significantly on “the
holdings of the Fifth and Ninth Circuit,” and on the Eleventh Amendment. See Pharm.,
801 F. Supp. at 513; Nicholl, 2016 WL 9651773, at *5. As explained above, however,
these holdings are inconsistent with N.C. Dental and other binding precedent.
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12
combination by others for restraint of trade.” Id. at 351-52 (citing Union Pacific Ry. Co.
v. United States, 313 U.S. 450 (1941)).
As the Court subsequently made clear, Parker did not create a general “conspiracy
exception” for political entities that conspired with private actors, but rather was
distinguishing cases like Union Pacific “where the State acts not in a regulatory capacity
but as a commercial participant in a given market.” City of Columbia v. Omni Outdoor
Advert., Inc., 499 U.S. 365, 374-75 (1991). The Court concluded by “reiterat[ing] that”
the antitrust laws do not apply to state action “with the possible market participant
exception.” Id. at 379.
More recently, the Court emphasized that “[l]imits on state-action immunity are
most essential when the State seeks to delegate its regulatory power to active market
participants.” N.C. Dental, 135 S. Ct. at 1111. That is because “prohibitions against
anticompetitive self-regulation by active market participants are an axiom of federal
antitrust policy.” Id. Thus, ipso facto exemption does not apply when a state agency
“controlled by active market participants” engages in regulation. Id. at 1113. It follows
that ipso facto exemption is inappropriate when a state agency acts purely as a market
participant, and thus not in a regulatory capacity at all. Cf. Phoebe Putney, 568 U.S. at
236 (“Parker and its progeny” protect “the States’ sovereign capacity to regulate their
economies and provide services to their citizens”). When a state agency is a market
participant, it cannot be presumed to have different incentives than its private
counterparts.
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13
Although the Supreme Court has not precisely defined what constitutes market
participation for Parker purposes, a line of dormant Commerce Clause cases, beginning
with Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976), treats state agencies
essentially as private parties, and hence free from the Clause’s strictures, when they
participate in a market as buyers or sellers instead of as regulators. See Brooks v. Vassar,
462 F.3d 341, 355-57 (4th Cir. 2006); see also Camps Newfound/Owatonna, Inc. v. Town
of Harrison, Me., 520 U.S. 564, 592-93 (1997) (market participation includes “a State
acting in its proprietary capacity as a purchaser or seller.”). These cases explain that it
“makes good sense and sound law” to treat state entities acting as market participants like
private firms, because “state proprietary activities may be, and often are, burdened with
the same restrictions imposed on private market participants.” Reeves, Inc. v. Stake, 447
U.S. 429, 436, 439 (1980). The Sherman Act is one of those restrictions. Cf. Jefferson
County Pharm. Ass’n, Inc. v. Abbott Labs., 460 U.S. 150-58, 170 (1984) (looking to
state-action cases and holding that “purchases by a State for the purpose of competing in
the private retail market” are not exempt from the Robinson-Patman Act). Accordingly,
for the additional reason that UNCSM was acting purely as a labor market participant, it
is not ipso facto exempt from Section 1.
6
6
Duke cites several lower court cases declining to recognize a market-participant
exception to Parker. See Duke Opp. to Pls. SA Br. 6. Those cases, however, all pre-
dated N.C. Dental, and none held the defendant ipso facto exempt.
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14
B. Midcal Is Not Satisfied
Because UNC is acting purely as market participant, it must satisfy both Midcal
prongs: clear articulation and active supervision. UNC satisfies neither prong.
1. North Carolina Has Not Clearly Articulated a Policy To
Displace Competition in Medical Faculty Hiring
To satisfy Midcal’s first prong, there must be a “clearly articulated and
affirmatively expressed” state policy to displace competition in medical faculty hiring.
445 U.S. at 105. Although a state legislature need not “explicitly authorize specific
anticompetitive effects” of the challenged actions, such effects must be “the inherent,
logical, or ordinary result of the exercise of authority delegated by the state legislature.”
Phoebe Putney, 568 U.S. at 229. “[T]he State must have foreseen and implicitly
endorsed the anticompetitive effects as consistent with its policy goals.” Id. Thus, in
Phoebe Putney, the Supreme Court held that the clear-articulation requirement was not
satisfied by statutes giving hospital authorities general corporate powers, including the
ability to acquire hospitals, because they did not clearly express a state policy “to make
acquisitions of existing hospitals that will substantially lessen competition.” Id.
The “clear articulation” inquiry is a “precise one.” Chamber of Commerce v. City
of Seattle, 890 F.3d 769, 782 (9th Cir. 2018), pet. for reh’g en banc denied (Sept. 14,
2018). “[T]he relevant question is whether the regulatory structure which has been
adopted by the state has specifically authorized the conduct alleged to violate the
Sherman Act.” Id. (citation and internal quotation marks omitted). Washington statutes
did not satisfy that requirement in Chamber of Commerce, because while they authorized
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15
regulation of “for hire transportation services without liability under federal antitrust
laws,” they were “silent on the issue of [driver] compensation contracts,” and thus did not
clearly articulate a state policy “to displace competition with respect to for-hire drivers’
compensation.” Id. at 783-84.
As in Chamber of Commerce, the North Carolina statutes cited by Duke (SA Br.
5) do not satisfy the clear-articulation requirement. Most of the cited statutes generally
instruct UNC to make an “economical use of the State’s resources.” See N.C. Gen. Stat.
§§ 116-1(a), (b), 116-11(11). Yet no-poaching agreements are not “the inherent, logical,
or ordinary result” of such general statutory directives. Phoebe Putney, 568 U.S. at 229.
Rather, such general policies “can be, and typically are” carried out “in ways that raise no
federal antitrust concerns,” so they do not satisfy the clear-articulation test. Id. at 228.
Like the unsuccessful defendant in Phoebe Putney, Duke also relies on the general
powers granted to the UNC Health board of directors in N.C. Gen. Stat. § 116-37(d).
That section authorizes the board to perform various functions, including “fix[ing] or
approv[ing] the schedules of pay,” and adopting rules and regulations concerning
conditions for employment such as “annual leave” and other “personnel policies.” Id.
This section does not satisfy the clear-articulation requirement for two independent
reasons.
First, to satisfy the clear-articulation test, “[t]he relevant statutory provisions must
plainly show that the [state] legislature contemplated the sort of activity that is
challenged.” Chamber of Commerce, 890 F.3d at 782 (citation and internal quotation
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16
marks omitted). Yet nothing in Section 116-37(d) suggests that the state legislature
contemplated UNCSM entering into no-poach agreements. While the section includes a
catch-all provision allowing the board of directors to take “any other measures that
promote the hiring and retention of capable, diligent, and effective career employees,”
that provision must be read in context with the rest of the statute’s focus on employment
conditions. See United States v. Turkette, 452 U.S. 576, 581 (1981) (“where general
words follow a specific enumeration of persons or things, the general words should be
limited to persons or things similar to those specifically enumerated” (ejusdem generis)).
There is a significant difference between offering annual leave and adopting a no-poach
agreement. The Supreme Court has cautioned against “appl[ying] the concept of
‘foreseeability’ from [the] clear-articulation test too loosely.” Phoebe Putney, 568 U.S.
at 229. Second, by its terms, the statute authorizes actions by the board of directors, not
a secret agreement by the UNCSM Dean (the existence of which Duke denies).
Duke also cites evidence that “UNC [has] enacted salary ceilings for its medical
faculty,” Duke SA Br. 2, 5, but UNC unilaterally setting salaries is materially different
from colluding with Duke to fix those salaries or not to poach each other’s medical
faculty. Cf. Verizon Commc’ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S.
398, 408 (2004) (“collusion” between competitors is “the supreme evil of antitrust”).
Nothing suggests that the North Carolina legislature contemplated collusive undertakings
by UNCSM.
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17
Finally, Duke improperly relies on the holding in Edinboro, 850 F.3d at 580, that
“mandating on-campus residency is a foreseeable consequence of the legislative mandate
to provide appropriate student living facilities,” and argues there were similar foreseeable
consequences here. See Duke SA Br. 7-8. Unlike in Edinboro, however, there is no clear
nexus between the legislative mandate and the challenged no-poach agreement. If there
were, Duke would not need to deny the agreement’s existence.
2. Active Supervision Is Required, But Absent Here
Since Duke denies the agreement occurred, Duke cannot credibly argue that the
agreement was actively supervised. Instead, Duke wrongly argues that “[b]ecause UNC
is a prototypical state agency,” it need not show active supervision. Duke SA Br. 10-12.
Because UNCSM would be acting purely as a labor market participant in entering into
the alleged no-poach agreement, active supervision is required, just as it is with private
parties.
The active-supervision requirement demands “that state officials have and exercise
power to review particular anticompetitive acts of private parties and disapprove those
that fail to accord with state policy.” N.C. Dental, 135 S. Ct. at 1112 (citation omitted).
The active-supervision requirement is crucial because it helps ensure that the
“anticompetitive policy is indeed the policy of a State.” Id. The clear-articulation
requirement “rarely will achieve that goal by itself, for a policy may satisfy this test yet
still be defined at so high a level of generality as to leave open critical questions about
how and to what extent the market should be regulated.” Id.
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18
N.C. Dental held that “active supervision” is “an essential condition of state-action
immunity when a nonsovereign actor has ‘an incentive to pursue [its] own self-interest.’”
Id. at 1113 (quoting Phoebe Putney, 568 U.S. at 226). That reasoning compels the
application of the active-supervision requirement in the circumstances here. As discussed
above (at pp. 7-11), UNCSM is a “nonsovereign actor” for Parker purposes. Moreover,
as a labor market participant, it has an incentive to pursue its own self-interest in hiring
medical faculty. Thus, here too, active supervision is “an essential condition of state-
action immunity.” N.C. Dental, 135 S. Ct. at 1113.
Duke incorrectly relies on Edinboro to buttress its argument that active
supervision is not required. Duke SA Br. 11. In Edinboro, however, the Third Circuit
held that active supervision was not required when a university “expand[ed] its on-
campus residency rule” from two to four semesters, which furthered its “educational
mission” and parental role. Id. at 850 F.3d at 574, 581 (“rules requiring on-campus
residency are ‘common at many colleges and universities,’ and are justified, at least in
part, by the educational benefits of a ‘living and learning’ environment and . . . ‘the
school’s attempts to fulfill a ‘parental’ role”). There was no suggestion that the
university was acting purely as a market participant. Here, by contrast, UNCSM is acting
purely as a labor market participant, and thus must satisfy the active-supervision
requirement just like Duke. The United States takes no position on whether active
supervision is required for all anticompetitive conduct by universities.
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19
Finally, contrary to Duke’s argument (Duke SA Br. 10-11), Hallie does not
support dispensing with the active-supervision requirement in this case. Hallie held that
municipalities need not prove active supervision in large part because they “are
electorally accountable and lack the kind of private incentives characteristic of active
participants in the market.” N.C. Dental, 135 S. Ct. at 1112. Neither of those
descriptions fits UNCSM here. Accordingly, Duke’s failure to show active supervision is
dispositive.
II. The Per Se Rule Applies To The Alleged No-Poach Agreement Unless Duke
Proves That It Is Reasonably Necessary To A Separate Legitimate
Collaboration With UNCSM
Agreements between competitors not to solicit or hire each other’s employees
harm competition in labor markets in the same way that agreements between them to
allocate customers or divide product markets harms competition in those markets. Like
other types of allocation agreements, such no-poach agreements between competing
employers are per se unlawful unless they are reasonably necessary to a separate
legitimate business transaction or collaboration between the employers, in which case the
rule of reason applies.
A. Customer- and Market-Allocation Agreements Are Per Se Unlawful
Section 1 of the Sherman Act declares “contract[s] . . . in restraint of trade or
commerce among the several States . . . illegal.” 15 U.S.C. § 1. The legality of many
restraints is “analyzed under a ‘rule of reason,’ according to which the finder of fact must
decide whether the questioned practice imposes an unreasonable restraint on competition,
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20
taking into account a variety of factors, including specific information about the relevant
business, its condition before and after the restraint was imposed, and the restraint’s
history, nature, and effect.” State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).
Yet the “rule of reason does not govern all restraints.” Leegin Creative Leather
Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886 (2007). Rather, some “types of restraints”
have “such predictable and pernicious anticompetitive effect, and such limited potential
for procompetitive benefit, that they are deemed unlawful per se.” Khan, 522 U.S. at 10.
The “per se approach permits categorical judgments with respect to certain business
practices that have proved to be predominantly anticompetitive,” Nw. Wholesale
Stationers Inc. v. Pac. Stationary & Printing Co., 472 U.S. 284, 289 (1985), including
“market-allocation agreements.” N.C. State Bd. of Dental Exam’rs v. FTC, 717 F.3d 359,
373 n.10 (4th
Cir. 2013), aff’d by N.C. Dental. The Supreme Court has “reiterated time
and time again that [agreements allocating markets among competitors] are naked
restraints of trade with no purpose except stifling of competition. Such limitations are
per se violations of the Sherman Act.” Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49
(1990) (per curiam) (internal quotation marks omitted).
The prohibition against allocating markets extends to agreements “between two
competitors to refrain from seeking business from each other’s existing accounts.”
United States v. Cooperative Theatres of Ohio, Inc., 845 F.2d 1367, 1372-73 (6th Cir.
1988). Such “customer allocation scheme[s]” are a “classic example[]” of per se
violations. Id. at 1371. An agreement not to compete for certain customers is manifestly
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21
anticompetitive because it forces the allocated customer to “face[] a monopoly seller”
rather than reap the benefits of competition between sellers that would result in lower
prices or better product offerings. Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774,
782 (7th Cir. 1994). Thus, an agreement to “allocate customers among the conspirators”
has effects “almost identical to those of price-fixing and is treated the same by the law.”
Id. Indeed, “[i]t would be a strange interpretation of antitrust law that forbade
competitors to agree on what price to charge, thus eliminating price competition among
them, but allowed them to divide markets, thus eliminating all competition among them.”
Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1415 (7th
Cir. 1995) (emphasis added).
The per se rule applies to a customer-allocation agreement regardless of whether
the agreement applies to new or existing customers, Palmer, 498 U.S. at 49-50; whether
customers are divided geographically or on some other basis, see United States v.
Cadillac Overall Supply Co., 568 F.2d 1078, 1088 (5th Cir. 1978); or whether it “would
only affect a small number of potential customers,” United States v. Kemp & Assocs., 907
F.3d 1264, 1277 (10th Cir. 2018) (citing United States v. Reicher, 983 F.2d 168, 170
(10th Cir. 1992)).
The United States has criminally prosecuted many customer- and market-
allocation agreements as per se violations of Section 1. E.g., Cooperative Theatres of
Ohio, 845 F.2d at 1372-73 (allocating movie-theater customers); United States v. Brown,
936 F.2d 1042, 1045 (9th Cir. 1991) (en banc) (allocating billboard sites); United States
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22
v. Suntar Roofing, Inc., 897 F.2d 469, 473 (10th Cir. 1990) (allocating roofing
customers); United States v. Goodman, 850 F.2d 1473, 1477 (11th Cir. 1988) (allocating
customers in garbage disposal industry); United States v. Koppers Co., 652 F.2d 290, 293
(2d Cir. 1981) (allocating territories in the sale of road tar); Cadillac Overall Supply Co.,
568 F.2d at 1090 (allocating customers of garment providers). Those prosecutions have
included both input- and output-market allocations. See, e.g., Brown, 936 F.2d at 1044-
45 (recognizing that an agreement allocating an input market (leaseholds for billboards)
was “a classic per se antitrust violation”); pp. 20-21, supra (discussing Cooperative
Theatres).
B. No-Poach Agreements Between Competing Employers Allocate
Employees Within A Labor Market
Just as an agreement between competitors to allocate customers eliminates
competition for those customers, an agreement between them to allocate employees
eliminates competition for those employees. As with other types of allocation
agreements, an employee that is a victim of an allocation agreement between employers
cannot reap the benefits of competition between those employers that may result in
higher wages or better terms of employment. Furthermore, just as allocation agreements
in product markets have almost identical anticompetitive effects to price-fixing
agreements, see p. 21, supra, no-poach agreements between competing employers have
almost identical anticompetitive effects to wage-fixing agreements: they enable the
employers to avoid competing over wages and other terms of employment offered to the
affected employees.
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23
For these reasons, courts have held that no-poach agreements among competitors
in labor markets are per se unlawful in the same way that customer- and market-
allocation agreements in product markets are per se unlawful. In United States v. eBay,
Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013), for example, the district court held that the
United States adequately pleaded a per se violation by alleging a naked agreement
between eBay and Intuit not to solicit or hire each other’s employees. The court denied a
motion to dismiss, ruling that the alleged restraint was “a ‘classic’ horizontal market
division” and that “[a]ntitrust law does not treat employment markets differently from
other markets in this respect.” Id. at 1039-40. The defendants ultimately entered into a
consent decree enjoining the unlawful agreement. See United States v. eBay, Inc., No.
12-cv-05869, Final Judgment, Doc. 66, at 2 (N.D. Cal. Sept. 2, 2014). Likewise, in In re
High-Tech Employee Antitrust Litigation, 856 F. Supp. 2d 1103, 1122 (N.D. Cal. 2012),
the court held that allegations of bilateral “Do Not Cold Call” agreements among high-
tech firms were sufficient to plead a per se violation of the Sherman Act.
7
7
The United States filed a complaint alleging these agreements were per se unlawful, and
they were enjoined pursuant to a consent decree. See Complaint, Doc. 1, United States v.
Adobe Sys., Inc., No. 1:10-cv-01629, ¶ 35 (D.D.C. Sept. 24, 2010); Competitive Impact
Statement, Doc. 2, at 2, 8-10 (D.D.C. Sept. 24, 2010); Final Judgment, Doc. 17, at 4
(D.D.C. Mar. 18, 2011); see also Complaint, Doc. 1, United States v. Lucasfilm Ltd., No.
1:10-cv-02220, ¶ 23 (D.D.C. Dec. 21, 2010); Final Judgment, Doc. 6-1, at 4 (D.D.C. May
9, 2011). The United States also challenged no-poach agreements among competing
railways as per se unlawful, which were enjoined pursuant to a consent decree in United
States v. Knorr-Bremse AG, No. 18-cv-747, Final Judgment, Doc. 19 (D.D.C. July 11,
2018). In private follow-on litigation, In re Railway Industry Employee No-Poach
Antitrust Litigation, No. 2:18-mc-798 (W.D. Pa.), a motion to dismiss the complaint is
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24
C. Ancillary No-Poach Agreements Are Not Per Se Unlawful
The per se rule, however, does not apply to all no-poach agreements. If a no-
poach agreement is reasonably necessary to a separate, legitimate business transaction or
collaboration among the employers, it is not per se unlawful as a naked restraint, but
instead judged under the rule of reason. Under the “ancillary restraints doctrine,” an
agreement ordinarily condemned as per se unlawful is “exempt from the per se rule” if it
is ancillary to a separate, legitimate venture between the competitors. Rothery Storage &
Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224, (D.C. Cir. 1986) (Bork, J.).
“To be ancillary,” an “agreement eliminating competition must be subordinate and
collateral to a separate, legitimate transaction,” and reasonably necessary to “make the
main transaction more effective in accomplishing its purpose.” Id. at 224, 227; accord
Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 335-38 (2d Cir. 2008)
(Sotomayor, J., concurring); Polk Bros., Inc. v. Forest City Enters., Inc., 776 F.2d 185,
188-89 (7th Cir. 1985); United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir.
1898) (Taft, J.), aff’d, 175 U.S. 211 (1899); Gregory J. Werden, Antitrust Analysis of
Joint Ventures: An Overview, 66 Antitrust L.J. 701, 705-09 (1998). Ancillary restraints
are subject to the rule of reason. Rothery Storage, 792 F.2d at 224; Salvino, 542 F.3d at
338 (Sotomayor, J., concurring).
pending. In Railway, the United States filed a Statement of Interest urging the court to
deny the motion to dismiss on February 8, 2019.
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25
For example, in Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001), the seller of
a company entered into a “no-hire” agreement with the buyer providing that the seller
would not hire the company’s employees for eight months. Id. at 136-137. The Third
Circuit held that because the no-hire agreement was an “ancillary” agreement “executed
upon the sale of a corporation,” it was properly analyzed under the rule of reason. Id. at
143, 145. Likewise, a district court recently held the per se rule inapplicable to a clause
in McDonald’s franchise agreements prohibiting franchisees from hiring employees at
other McDonald’s restaurants, because the hiring restriction was “ancillary to franchise
agreements for McDonald’s restaurants.” Deslandes v. McDonald’s USA, LLC, 2018
WL 3105955, at *2, *7 (N.D. Ill. June 25, 2018).
8
D. Duke’s Arguments For Applying The Full Rule Of Reason Lack Merit
Duke incorrectly asserts that “[n]o court has ever ruled that an alleged employee
‘no poach’ agreement is subject to the per se standard.” Duke RoR Br. 1. As discussed
above, courts have denied motions to dismiss per se claims and held that the challenged
no-poach agreements would be subject to the per se rule if the allegations of nakedness
are supported by the evidence. While those cases did not reach an ultimate adjudication
of liability, that was because the defendants settled and entered into consent judgments
enjoining the agreements. See p. 23 & n.7, supra.
8
The court nonetheless recognized that, “because a no-hire agreement is, in essence, an
agreement to divide a market, the Court has no trouble concluding that a naked horizontal
no-hire agreement would be a per se violation of the antitrust laws.” Deslandes, 2018
WL 3105955, at *6.
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26
While courts are reluctant to create new per se categories, Duke is wrong to assert
that application of the per se rule to the no-poach agreement at issue here would create a
new per se category. Market-allocation agreements have long been held per se illegal.
As the eBay court explained, no-poach agreements among competitors are “a ‘classic’
horizontal market division,” just in an “employment market” rather than a product
market. 968 F. Supp. 2d at 1039-40. Likewise, the leading antitrust treatise states that
“[a]n agreement among employers that they will not compete against each other for the
services of a particular employee or prospective employee is, in fact, a service division
agreement, analogous to a product division agreement” and is “generally unlawful per
se” if not negotiated as part of a collective bargaining process. 12 Herbert Hovenkamp,
Antitrust Law ¶ 2013b, at 148 (3d ed. 2012). The Supreme Court has made clear that the
application of the per se rule does not depend on the amount of judicial experience with
the particular “industry” at issue, but instead turns on the amount of experience “with the
particular type of restraint challenged.” Arizona v. Maricopa Cty. Med. Soc., 457 U.S.
332, 349 & n.19 (1982). There is ample judicial experience with allocation agreements.
See pp. 21-23, supra.
Duke’s reliance on Weisfeld v. Sun Chem. Corp., 210 F.R.D. 136, 143 (D.N.J.
2002), aff’d, 84 F. App’x 257 (3d Cir. 2004), Yi v. SK Bakeries, Inc., No. 18-5627 RJB,
Dkt. 33 (W.D. Wa. Nov. 13, 2018), and Deslandes, Duke RoR Br. 4, is misplaced. In
Weisfeld, the district court stated that the rule of reason would apply to several no-hire
agreements under Eichorn as part of a decision denying class certification. 210 F.R.D. at
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27
143; see p. 25, supra (discussing Eichorn).
9
While affirming that denial because of the
lack of proof of class-wide injury, the Third Circuit went out of its way to criticize the
district court’s analysis of the no-hire agreements, noting that “the facts in Eichorn are
different than those here” and suggesting those factual differences could affect the
appropriate legal analysis of the no-hire agreements. 84 Fed. App’x at 260 & n.2.
10
Moreover, both Yi and Deslandes involve no-poach provisions in franchise agreements,
which are quite different from the naked no-poach agreement between competitors
alleged here.
11
Duke’s arg
ument that the per se rule does not apply because “the alleged
conspirators are not-for-profit academic institutions that serve public interests in lieu of
profit-maximization,” Duke RoR Br. 4-6, is also mistaken. As the Supreme Court has
made clear, “[t]here is no doubt that the sweeping language of [Section 1] applies to
nonprofit entities, and in the past we have imposed antitrust liability on nonprofit entities
which have engaged in anticompetitive conduct.” NCAA v. Bd. of Regents, 468 U.S. 85,
9
In Weisfeld, Sun Chemical Corp. and Flint Ink agreed in a settlement that for “five years
neither company would solicit the other’s employees” or “hire an unsolicited employee”
without prior notice. 210 F.R.D. at 138. Sun, Flint, and another ink manufacturer, INX,
“later entered into more extensive agreements” promising “not to hire each other’s
employees at all.” Id.
10
The Third Circuit ultimately declined to address whether the per se rule or rule of
reason applied, finding the issue “irrelevant” given the lack of class-wide proof of
antitrust injury. Id. at 260.
11
The vertical agreements between the franchisor and franchisees are evaluated under
the rule of reason, and any horizontal agreements among the franchisees may implicate
the ancillary restraints doctrine.
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28
101 n.22 (1984) (citations omitted). Like other firms, nonprofit entities can “seek to
maximize profits” through avoiding competition. United States v. Rockford Memorial
Corp., 898 F.2d 1278, 1285 (7th Cir. 1990).
Citing two cases from other circuits, Duke makes the sweeping assertion that
“agreements between universities necessitate rule of reason analysis because such
agreements may serve different goals, and have different effects, from those of a
traditional firm.” Duke RoR Br. 5 (citing United States v. Brown Univ., 5 F.3d 658, 671-
72 (3d Cir. 1993); and Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1062 (9th Cir. 2001)).
Neither case, however, involved a no-poach agreement, and neither applied the rule of
reason simply because the defendants were universities. Brown University focused on
the particulars of the conduct, which involved need-based financial aid. The court found
significant “the undisputed public interest in equality of educational access and
opportunity” in connection with the “alleged pure altruistic motive and alleged absence of
any revenue maximizing purpose.” 5 F.3d at 672. This is different from the no-poach
agreement here that Duke claims (in its state action briefing) would be supported by
UNCSM’s desire to pay medical faculty less to save resources. See p. 15, supra. In
Tanaka, the transfer rule was part of a broad set of restrictions on intercollegiate athletics,
not a naked restraint with no purpose except stifling competition, as alleged here.
Duke also wrongly argues that the rule of reason must apply because the “schools
collaborate and support each other” and a no-poach agreement could help prevent “free
riding” on their investment in medical faculty. Duke RoR Br. 9-10. This is exactly the
Case 1:15-cv-00462-CCE-JLW Document 325 Filed 03/07/19 Page 34 of 38
29
sort of argument the ancillary restraints doctrine is designed to address, see supra Part
II.C, but there are two deficiencies in Duke’s showing. First, for a restraint to be
ancillary, there must be a separate legitimate collaboration that it renders more
effective.
12
Duke has not identified any specific collaboration between it and UNCSM to
which the no-poach agreement would have been ancillary. Second, to be ancillary, a
restraint must be reasonably necessary to achieve the benefits of the legitimate
collaboration, but Duke cannot show that here while denying the restraint’s existence.
This case is at the summary judgment stage, and the facts are to be determined at
trial. Yet if the evidence proves that Duke and UNCSM entered into a naked no-poach
agreement, the Court should not hesitate to declare it per se unlawful.
CONCLUSION
The Court should reject Duke’s arguments that it is exempt under Parker and that
the alleged no-poach agreement must be analyzed under the full rule of reason as a matter
of law.
Dated: March 7, 2019 Respectfully submitted,
/s/ Nickolai G. Levin
Nickolai G. Levin (
DC Bar 490881)
Specially Appearing Under Local Rule 83.1(d)
12
A restraint also could be ancillary to the sale of a business, as in Eichorn, however no
such sale is alleged here.
Case 1:15-cv-00462-CCE-JLW Document 325 Filed 03/07/19 Page 35 of 38
30
MATTHEW G.T. MARTIN
United States Attorney
MAKAN DELRAHIM
Assistant Attorney General
LYNNE P. KLAUER
Assistant U.S. A
ttorney
101 S. Edgeworth St., Fourth Floor
Greensboro, NC 27403
Tel: (336) 333-5351
MICHAEL F. MURRAY
Deputy Assistant Attorney General
WILLIAM J. RINNER
Chief of
Staff and Senior Counsel
KRISTEN C. LIMARZI
NICKOLAI G. LE
VIN
Attorneys
U.S. Department of Justice
Antitrust Division
950 Pennsylvania Ave. NW #3224
Washington, DC 20530
Tel: (202) 514-2886
Nickolai.Levin@usdoj.gov
Case 1:15-cv-00462-CCE-JLW Document 325 Filed 03/07/19 Page 36 of 38
CERTIFICATE OF WORD COUNT
I certify that this Statement of Interest contains 7,675 words in the body of the
statement, including headings and footnotes, as determined by the word count feature in
Microsoft Word. This approximates the total word limits on the state-action and rule-of-
reason briefs under this Court’s order extending word limits and authorizing separate
summary judgment briefs. See Doc. 280, at 3 (authorizing the parties to file briefs up to
5,000 words on state action, and to file separate briefs on the remaining summary
judgment issues up to 7,000 words collectively); Duke RoR Br. 13 (certifying the brief is
2,767 words); Pls. Opp. to RoR Br. 13 (certifying the brief is 2,774 words).
Dated: March 7, 2019 /s/ Nickolai G. Levin
Attorney
Case 1:15-cv-00462-CCE-JLW Document 325 Filed 03/07/19 Page 37 of 38
CERTIFICATE OF SERVICE
I hereby certify that on March 7, 2019, I caused to be electronically filed the
foregoing Statement of Interest with the Clerk of the Court using the CM/ECF system,
which will send notification of such filing to all parties by operation of the Court’s
electronic filing systems.
Dated: March 7, 2019 /s/ Nickolai G. Levin
Attorney
Case 1:15-cv-00462-CCE-JLW Document 325 Filed 03/07/19 Page 38 of 38
