Defendants Lose Motion To Dismiss Antitrust Class Action Over No Poach Claims

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Michael DeMarino

Duane Morris Takeaways – In Borozny, et al, v. Raytheon Technologies Corp, Pratt & Whitney Division et al, No. 3:21-CV-1657, 2023 WL 348323 (D. Conn. Jan. 20, 2023), Judge Sarala Nagala of the U.S. District Court for the District of Connecticut declined to dismiss private civil class action claims against Raytheon’s Pratt & Whitney division, a leading manufacturer of civil and military airline engines, and the other defendants named as outsource suppliers for skilled aerospace labor. The decision in Borozny is an important one for companies because it serves as a reminder that even agreements to restrain trade amongst non-competitors can be treated as a per se antitrust violation and thus make it easier for Plaintiffs to obtain Rule 23 class certification.

Background Of The Case

In Borozny, et al, v. Raytheon Technologies Corp – an antitrust putative class action – eight named Plaintiffs alleged, on behalf of themselves and others similarly situated, that six corporate Defendants engaged in a conspiracy to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, by secretly agreeing to restrict their competition in the recruitment and hiring of aerospace engineers and other skilled workers in the jet propulsion systems industry.

Specifically, Plaintiffs alleged that Defendants’ alleged conspiracy not to hire or recruit each other’s employees was kept secret from Defendants’ employees due to its illegality and negative impact on the compensation and career options of Defendants’ employees. Plaintiffs further alleged that once any Defendant hired any aerospace worker, no other Defendant could recruit or hire that same employee, and that this agreement allowed Defendants to artificially suppress the market rate for aerospace workers. According to Plaintiffs, this alleged conspiracy impacted the market for aerospace workers by suppressing labor competition and, in turn, compensation.

Defendants moved to dismiss the complaint, arguing that that Plaintiffs had failed to allege conduct that is appropriately deemed a per se antitrust violation and failed to plead an alternative rule of reason claim.  The Court denied Defendants’ moutons to dismiss.

The Court’s Ruling

Defendants moved to dismiss the Complaint on the basis that it failed to allege a per se antitrust violation and also failed to allege in the alternative a rule of reason violation.  Defendants’ core contention was that they had a vertical, rather than a horizontal, relationship with each other, such that any agreements amongst them cannot be per se violations of the Sherman Act.  As the Court, explained, “the difference between a horizontal restraint on trade and a vertical restraint on trade is that . . . [r]estraints imposed by agreement between competitors have traditionally been denominated as horizontal restraints, and those imposed by agreement between firms at different levels of distribution as vertical restraints.”’ Id. at *6.

The Court rejected Defendants’ argument, and agreed with Plaintiffs that Defendants were focusing on the “wrong market.”  Id. The Court opined that the relevant market is not, as Defendants suggested, the market for aircraft engines or the “greater aerospace industry at large,” but rather the labor market for aerospace workers.

Because the complaint alleged a “conspiracy to restrain competition in the aerospace labor market” the Court concluded that “all Defendants . . . participate in that market horizontally, and they are all alleged to have participated in the market division conspiracy horizontally, and thus, per se treatment could be appropriate.”  Id. at *7.

The Court similarly concluded that Plaintiffs sufficiently alleged a rule of reason violation. To state a claim for a rule of reason violation, Plaintiffs must “allege[s] a plausible relevant market in which competition will be impairedand an adverse impact on that market.  Id. at *8.  Plaintiffs alleged that they could not easily transition to work outside of aerospace engineering firms, given the specialized training they obtained by working for Defendant.  Based on these allegations, the Court found “it reasonable, at least for purposes of a motion to dismiss, for Plaintiffs to limit the proposed market to the aerospace industry and to exclude other potential positions for people with Plaintiffs’ qualifications.”  Id.  As such, the Court held that Plaintiffs adequately alleged a plausible market for purposes of alleging a rule of reason violation.

The Court also concluded that Plaintiffs had alleged an adverse impact on the relevant market. Plaintiffs alleged that the agreement not to hire each other’s employees allowed Defendants to keep wages artificially low, due to the decreased competition in the market for aerospace workers. The Court found these allegations, “adequately stated an effect on the market.”  Id. at *13. Thus, the Court concluded that “Plaintiffs have adequately, although inartfully, pleaded an antitrust claim under the rule of reason.” Id.

On these bases, the District Court denied Defendants’ motions to dismiss.

Implications For Companies Facing Antitrust Class Actions

The ruling in Borozny highlights the ongoing battle in antitrust no-poach class actions to plead a per se violation. Indeed, in the class action context, whether the court analyzes the no-poach agreements under the per se or rule of reason test is often the critical issue driving the outcome of whether plaintiffs can satisfy Rule 23’s class certification requirements. This is because a per se violation (unlike a rule of reason violation) relieves a plaintiff from having to define the market where antitrust harm occurred, which often involves individualized inquiries that overwhelm the commonality necessary for class certification.

Employers should understand that their risk for no-poach claims extends broader than a potential alleged conspiracy with their competitors.  Borozny is a reminder that even agreements amongst non-competitors in vertical relationships (i.e., at different levels of the market structure) can be treated as a per se violation if they are horizontal competitors in the labor market.  Corporate defendants are well-advised to analyze and vet their vendor agreements and staffing contracts to look for potential restraints on competition.

Fifth Circuit Affirms Striking Class Allegations From The Face Of A Complaint

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Michael DeMarino

Duane Morris Takeaways – In Elson v. Black, No. 21-20349, 2023 WL 111317, at *1 (5th Cir. Jan. 5, 2023), the U.S. Court of Appeals for the Fifth Circuit affirmed the District Court’s decision to strike the class allegations in a nationwide class action alleging false and deceptive marketing practices.  The decision in Elson is an important one for companies because it serves as reminder that, although sometimes discouraged, motions to strike class allegations are still a key weapon for defeating a class action lawsuit and cutting off class-wide discovery.

Background Of The Case

Plaintiffs were a group of women who alleged that Defendants falsely advertised the benefits and effectiveness of Defendants’ beauty product.  In their complaint, Plaintiffs asserted claims under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 and multiple state statutes on behalf of a nationwide class and seven sub-classes representing the seven states in which Plaintiffs resided. Id. at *1.

Defendants moved to strike Plaintiffs’ class allegations and, after a hearing and some limited discovery, the District Court agreed with that position and struck the class allegations.  The District Court concluded that “[b]ecause the basis for the claims are misrepresentations, reliance on them will be a key factor with every potential plaintiff” and it was “not convinced that commonality is present as each potential plaintiff would have to show that their reliance was justified.”  Id. at *2.  The District Court also dismissed Plaintiffs’ individual claims for failure to state a claim.  Plaintiffs then appealed the order striking the class allegations, as well as the dismissal of their individual claims. Id.

The Fifth Circuit’s Ruling

On appeal, Plaintiffs mainly argued that the District Court failed to conduct the “rigorous analysis” required by Rule 23 of the Federal Rules of Civil Procedure and, in turn, overlooked the fact that reliance is not an element of many of the state statutes at issue. Id. The Fifth Circuit disagreed.  Applying an abuse of discretion standard, the Fifth Circuit concluded that Plaintiffs were unable to establish Rule 23(b)(3)’s requirement that “questions common to the class predominate over other questions.” Id.

Specifically, the Fifth Circuit noted that the burden was on Plaintiff to show that the differences in state law would not predominate over issues individual to each plaintiff in the litigation.  The Fifth Circuit therefore concluded that, by failing to present a sufficient choice of law analysis, Plaintiffs failed to meet their burden of showing that common questions of law predominate and, in fact “variations in state law . . .  swamp any common issues and defeat predominance.” Id. at *3.

Just as important, the Fifth Circuit also held that Plaintiffs could not establish predominance because “Plaintiffs’ allegations introduce numerous factual differences that in no way comprise a coherent class.” Id.  In reaching that holding, the Fifth Circuit observed that the named plaintiffs did not complain “about the same alleged misrepresentations.” Id.  As a result, the Fifth Circuit opined that “discerning the truth or falsity of each representation would require a group-by-group analysis, complicated by the fact that the members of each group are from different states.” Id.

In response, Plaintiffs proposed seven state-specific sub-classes under Rule 23(c)(5).  However, the Fifth Circuit rejected that solution. ‘‘Sub-class,” the Fifth Circuit opined, “is not a magic word that remedies defects of predominance. The burden is on Plaintiffs to demonstrate to the district court how certain proposed sub-classes would alleviate existing obstacles to certification.”  Id. at *4. Ultimately, the Fifth Circuit held that Plaintiffs failed make that showing.

At the end of the day, the Fifth Circuit ruled that “[d]espite the brevity of the . . . order, we see no reason to reverse the district court formalistically for its further elaboration on what is clear from the face of the pleadings” and concluded that it did not abuse its discretion in striking the class allegations.

Implications For Companies Facing Class Actions

The ruling in Elson underscores the importance that a motion to strike can play in defeating class action claims as a first strike response and is a reminder that sub-classes are not a cure-all for predominance problems.  Although some jurisdictions have viewed such motions with a bit of skepticism, corporate defendants are well-advised to consider whether to bring such a motion at the outset of the case, as an order striking class allegations is functionally equivalent to an order denying class certification and thus could put an early end to what otherwise might be tedious and lengthy litigation.

Montana Federal Court Denies Class Certification In Gender Discrimination Litigation

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Michael DeMarino

Duane Morris Takeaways – In Cole, et al. v. Montana University System, at al., 21-CV-88 (D. Mont. Oct. 3, 2022), the U.S. District Court for the District of Montana recently denied certification of a Title IX class action alleging discrimination and harassment on the basis of sex.  The decision in Cole is an important one for employers, as it is a reminder that Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), is still a major obstacle to class certification of broad discrimination claims.  Companies and their corporate counsel are well-served to heed the lessons of Cole and center their class certification defense strategy around the commonality requirement articulated in Wal-Mart Stores, Inc.

Background Of The Case

Plaintiffs were a group of women suing Defendants for alleged violations of Title IX and sought to certify a class of approximately 76 women who allegedly experienced harassment, retaliation, and/or discrimination on the basis of their sex.  Plaintiffs alleged that Defendants either forced them to resign, terminated their positions, or limited their options for professional growth. Id. at 3-5.

Specifically, Plaintiffs alleged that Defendants fostered a “good ol’ boys club” culture, favoring male athletes and employees, while excluding Plaintiffs from participating in activities and benefits regularly afforded to their male counterparts. Id. at 3-9.

Against this backdrop, Plaintiffs alleged that a “retaliatory culture blossomed” and that all Plaintiffs experienced direct retaliation or the fear of retaliation for speaking out against Defendants’ alleged discriminatory conduct. Id. at 8-9.

The Court’s Class Certification Ruling

After the parties filed competing motion papers in support of class certification, and to deny class certification, the Court issued a lengthy and thorough order, which ruled that Plaintiffs failed to satisfy the requirements for class certification. At the heart of the Court’s analysis was Rule 23(a)’s commonality requirement, which ultimately drove the Court’s decision to deny class certification.

Analyzing the evidence and the parties’ submissions, the Court noted that Plaintiffs’ claims appeared to be too disparate to be resolved in one stroke, which is key to satisfying Rule 23(a)’s commonality requirement. In reaching that conclusion, the Court relied extensively on the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). Specifically, the Court found that Plaintiffs failed to identify an employment practice that ties together the putative class members to satisfy the U.S. Supreme Court’s reasoning in Wal-Mart Stores, Inc.

Plaintiffs, for their part, argued that the Ninth Circuit had adopted a “permissive view of commonality” in employment discrimination claims and that the existence of shared legal issues with divergent factual predicates was sufficient to satisfy commonality. The Court, however, rejected this argument. It opined that its analysis was “constrained” by Wal-Mart Store, Inc. Id. at 17.

The Court reasoned that, according to Wal-Mart Stores, Inc., commonality requires both a shared legal theory and shared facts such that determination of one claim can answer all others. Citing Wal-Mart Stores, Inc., the Court noted that there are only two mechanisms to bring a class claim alleging broad discrimination, including: (1) show that the employer used a biased testing procedure to evaluate potential employees; or (2) provide significant proof that the employer operated under a general policy of discrimination.

Based on its analysis, the Court held that Plaintiffs failed to demonstrate that Defendants acted under a general policy of discrimination and the injuries alleged required distinct inquiries into each Plaintiff’s circumstances, qualifications, and the alleged discrimination.

For similar reasons, the Court also concluded that Plaintiffs could not satisfy Rule 23(b)’s predominance requirement because individualized issues were more prevalent than common ones and Defendants’ liability was not subject to common proof.

As a result, the Court denied Plaintiffs’ motion for class certification without prejudice.

Implications For Employers

The ruling in Cole underscores the importance that Wal-Mart Stores, Inc. v. Dukes plays in employment discrimination cases. At times, the Court was sympathetic to Plaintiffs, and recognized the inherent evidentiary problems in broad employment discrimination cases. The Court even lamented the “harsh nature of the standard as imposed on a discrimination case.” Id.  Nevertheless, Wal-Mart Stores, Inc. proved to be too much of an obstacle to Plaintiffs’ class certification theories.

The lesson from this decision is that employers should center their class certification defense strategy on the key holdings in Wal-Mart Stores, Inc., particularly the fact that commonality requires both a shared legal theory and shared facts.  Cole teaches that because it is somewhat easier for plaintiffs to assert shared legal theories, employers should focus on divergent facts.


New York Federal Court Grants Class Certification In Pay Discrimination Litigation

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Michael DeMarino

New York City The Big AppleDuane Morris Takeaways – In Chalmers, et al. v. City of New York, 22 Civ. 3389 (S.D.N.Y. Sept. 19, 2022), Judge Analisa Torres of the U.S. District Court recently certified a Title VII class action alleging race discrimination in pay for various positions involving fire protection inspectors in the City’s Fire Department. The decision in Chalmers is an important one for employers, as shows how plaintiffs’ class action lawyers are using certification theories to “work around” the seemingly impregnable barrier to class certification based on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). Corporate counsel are well-served to heed the lessons of Chalmers in crafting their approaches to dealing with workplace class action litigation. Continue reading “New York Federal Court Grants Class Certification In Pay Discrimination Litigation”

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