Seyfarth Synopsis: On February 1, 2018, the U.S. District Court for the Middle District of North Carolina entered an order granting in part, and denying in part, the plaintiff’s motion for class certification in a no-hire antitrust case entitled Seaman v. Duke University, 1:15-CV-462, at 1-2 (M.D.N.C. Feb. 1, 2018) (A copy of the decision can be found here.) The case was brought against Duke University, Duke University Health System (collectively “Duke”), and various University of North Carolina entities and one of its executives (collectively “UNC”). The complaint alleged that the defendants had entered into an agreement not to hire each other’s medical faculty employees in violation of federal antitrust laws. With some notable exceptions it has been difficult for plaintiffs to achieve class certification in wage suppression cases such as Seaman. The ruling is a “must read” for employers, as the Court’s reasoning and conclusions make it difficult to predict whether this case will be helpful or hurtful to the plaintiffs’ bar in other cases.
Background To The Case
Seaman, an Assistant Professor of Radiology at Duke, contended that she applied for a position at UNC in 2015. She alleged that she was denied consideration due to an agreement among the Duke and UNC defendants that they would not hire each another’s medical faculty employees unless the hire involved a promotion. Seaman alleged that this agreement not only suppressed the compensation of defendants’ medical faculty members, but also their other skilled medical employees. Thus, Seaman sought to certify a class consisting not only of defendants’ medical faculty members, but also their physicians, nurses, and skilled medical staff. Id. at 1-2.
Antitrust Impact And Damages – Faculty
The primary certification challenge for the plaintiff in Seaman was to demonstrate predominance under Rule 23(b)(3), as there was little dispute that the other Rule 23 requirements were satisfied. As is typical with wage suppression antitrust cases, the battleground centered on whether antitrust impact and damages could be shown with common proof. The Court defined antitrust impact as injury that reflects the anti-competitive effect, either of the violation or of anti-competitive acts made possible by the violation. Id. at 8. Seaman contended that the no-hire agreement had an antitrust impact on faculty compensation in two ways, including: (1) the defendants did not have to provide preemptive compensation increases for faculty that otherwise would have been needed to ensure employee retention; and (2) the defendants’ internal equity structures – policies and practices that are alleged to have insured relatively constant compensation relationships between employees – spread the individual harm of decreased lateral offers and corresponding lack of retention offers to all faculty, thus suppressing compensation faculty-wide. The Court agreed that the evidence offered by Seaman to prove these facts was common to the class. Id. at 8-9.
Regarding damages, Seaman’s expert testified that his analysis of the data demonstrated that compensation increases were associated with increases in experience – i.e., individual faculty members were typically paid more as they obtained experience. Id. at 13. The expert conducted a regression analysis and applied the results “to the faculty compensation data to develop an aggregate damages estimate for faculty.” Id. at 14. Based on this evidence, the Court concluded that Seaman’s proposed method for calculating damages was based upon evidence that would be common to the faculty.
Antitrust Impact And Damages – Non-Faculty
Seaman’s expert also attempted to demonstrate that antitrust impact and damages could be shown with common proof as to non-faculty members based on the same analysis applied to faculty members. As to impact, the Court noted that unlike the faculty, there was no evidence that non-faculty received retention offers or peremptory compensation increases that would then be spread to other non-faculty through Seaman’s internal equity theory. Thus, the Court concluded that Seaman’s method of proving impact involved individual rather than common proof for all non-faculty. Id. at 15-16.
Accordingly, the Court granted the motion for class certification as to faculty members, but not as to non-faculty members. Id. at 21-25.
Implications For Employers
It is unclear what precedential impact Seaman may have on future class action wage suppression cases. Plaintiffs have had mixed results achieving class certification in compensation suppression cases. This is true in wage information exchange cases as well as cases involving no-hire agreements such as Seaman. For example, in Weisfeld v. Sun Chem. Corp., 84 Fed. Appx. 257, 258 (3rd Cir. 2004), the Third Circuit upheld the district court’s decision denying certification in an antitrust case involving an alleged series of no-hire agreements among employers in the ink printing industry, agreeing with the district court that the plaintiff did not satisfy the requirements of Rule 23(b)(3). Among other things, the Third Circuit noted that the “decreased salary and deprivation of opportunities inquiries would require considering numerous individual factors” including “whether a covenant not to compete was included in a particular employee’s contract; employee salary history, educational and other qualifications; employer’s place of business; employee’s willingness to relocate to a distant competitor; and [employees’] ability to seek employment in other industries in which their skills could be utilized….” Id. at 264. There was no mention in Seaman whether factors like this were present, and if so, how they could be addressed with common evidence. It would certainly be unusual if the only factor affecting compensation was experience.
Furthermore, the expert’s damage model in Seaman was designed to show only an “aggregate class-wide damages estimate for faculty.” It is not entirely clear what the Court meant by that phrase, but if the Court was referring to an average wage suppression, such reliance has been pointedly rejected as a “fundamental flaw” by at least one other court. In rejecting the plaintiff’s expert’s analysis in Reed v. Advocate Health Care, 268 F.R.D. 573, 590-92 (N.D. Ill. 2009), the court stated: “Measuring average base wage suppression does not indicate whether each putative class member suffered harm from the alleged conspiracy. In other words, it is not a methodology common to the class that can determine impact with respect to each class member.” Id. at 591.
Given these issues, it remains to be seen what effect Seaman will have on future cases.