Dentists Seek Class Certification In Billion Dollar Antitrust Dispute With Delta Dental

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On February 6, 2024, in In Re Delta Dental Antitrust Litigation, No. 1:19-CV-06734, MDL No. 2931 (N.D. Ill. Feb. 6, 2024). roughly 240,000 dentists and dental practices sought class certification in the U.S. District Court for the Northern District of Illinois against Delta Dental, the largest dental insurance system in the United States, on grounds that Delta Dental and its related entities artificially lowered the reimbursement rates paid for dental goods and services to Plaintiffs in violation of the federal antitrust laws. Plaintiffs moved for class certification under Rule 23(a) and Rule 23(b)(3) on the grounds that all class members have been harmed substantially by the alleged conspiracy between Defendants and that evidence common to the class confirms the existence of the conspiracy to suppress reimbursement rates in violation of Sherman Act Section 1.

Corporate counsel should follow In Re Delta Dental Antitrust Litigation as the ruling on class certification could have a significant impact class action law, generally, and on trade and professional associations facing antitrust issues, specifically.

Case Background

Plaintiffs are dentist and dental practices who participate pursuant to provider agreements in Delta Dental’s Premier or PPO networks. Defendants are the largest dental insurance system in the United States and are comprised of Delta Dental, its 39 state-level member companies and their national coordinating entities, Delta Dental plans Association and DeltaUSA. Plaintiffs claim that Defendants formed a cartel and committed per se violations of Section 1 of the Sherman Act by agreeing to reduce reimbursements to Plaintiffs through territorial restrictions, agreeing to fix the prices for specific dental goods and services, and agreeing to restrict competition from other competitors.

Rule 23 Contentions

Plaintiffs argue that class certification is appropriate under Rule 23(b)(3) because evidence common to the class can prove the existence of the conspiracy and harm to the class in the form of lower reimbursement rates. Plaintiffs claim that written agreements imposed territorial restrictions on competition and required adherence to uniform, or fixed, prices for dental goods and services. The agreements also restricted efforts to sell dental insurance under different brands. According to the model advanced by Plaintiffs’ economic expert, Plaintiffs will be able to establish both class-wide impact and class-wide damages on behalf of more than 97 percent of the proposed class. Plaintiffs also argue that Defendants’ procompetitive justifications for the restrictions are irrelevant in a per se antitrust case, but, in any event, are without merit because premiums paid by dental patients increased substantially during the class period and Delta Dental passed on the increased premiums to executives in the form of generous salaries.

Implications For Corporate Defendants

In Re Delta Dental Antitrust Litigation is another example of a federal court class certification decision that will turn whether evidence of common, injury-producing conduct exists. It will be interesting to follow whether the Court credits evidence as capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.

Illinois Supreme Court Opens The Door For More Wage & Hour Antitrust Class Actions

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On January 19, 2024, the Illinois Supreme Court unanimously held that the Illinois Antitrust Act does not allow staffing agencies to avoid allegations that they suppressed wages and agreed not to hire each other’s workers in The State of Illinois ex rel. Kwame Raoul v. Elite Staffing, Inc., et al., No. 2024 IL 128763 (Ill. Jan. 19, 2024). The Supreme Court rejected defense arguments that the complaint failed to state a cause of action because the Illinois Antitrust Act provides that services otherwise subject to the Act “shall not be deemed to include labor which is performed by natural persons as employees of others.” Id. at 3. The Supreme Court concluded that reading the Illinois Antitrust Act so broadly would contradict the entire purpose of the Act, i.e., promoting and protecting free and fair competition; therefore it found that the Act does not exclude all agreements concerning labor services, including the conduct alleged.

Illinois v. Elite Staffing is an important reminder that businesses must be mindful of state antitrust and competition laws, in addition to the federal antitrust laws, and is required reading for any corporate counsel handling antitrust class action litigation under state antitrust and competition laws involving wage-suppression issues.

Case Background

In July 2020, the Illinois Attorney General sued Elite Staffing Inc., Metro Staff Inc., Midway Staffing Inc. and their common customer, Colony Inc., on grounds that Colony required the staffing agencies not to poach each other’s employees and to agree to below-market wages for temporary workers at Colony. The three staffing firms provided a Colony facility with temporary workers beginning in 2018 where between 200 and 1,000 temporary workers would work at any given time. According to the allegations in the Complaint, Colony required the staffing agencies not to offer better wages or other benefits to any of each other’s workers and precluded the workers from trying to switch between the agencies. The Defendants moved to dismiss the complaint arguing that the alleged conduct was exempted from antitrust liability under the Illinois Antitrust Act. The circuit court denied the motion, and the Illinois Appellate Court concluded that the exemption in the Act did not extend to services provided by staffing agencies. The Illinois Supreme Court thereafter granted Defendants’ petition for leave to appeal.

Illinois Antitrust Act Does Not Exclude All Agreements Concerning Labor

Section 4 of the Illinois Antitrust Act exempts from coverage “labor which is performed by natural persons as employees of others.” See 740 ILCS § 10/4. This section is important because, among other reasons, § 3 of the Illinois Antitrust Act, which is expressly modeled after § 1 of the Sherman Act and federal court interpretations thereof, would otherwise proscribe the conduct alleged in the Complaint. The Supreme Court noted that just as reading §1 of the Sherman Act to prohibit every restraint on competition would be absurd, so too would be reading § 4 of the Illinois Antitrust Act in isolation. Specifically, the Supreme Court found that “service” cannot be read so broadly as to exempt all agreements concerning wages and conditions of employment from antitrust scrutiny regardless of their anticompetitive effects, which would be contrary to the entire purposes of the Illinois Antitrust Act. Id at 19. The Supreme Court concluded that agreements between employers that concern wages or hiring may violate the Illinois Antitrust Act unless it is part of a collective bargaining process.

Implications For Employers

Illinois v. Elite Staffing opens to door for workers in Illinois to use state antitrust law to tilt labor market dynamics in their favor and to increase their bargaining leverage for greater compensation and benefits. It serves as an important reminder for employers to also be mindful of state antitrust and competition laws when making labor market decisions.

UFC Loses Summary Judgment In Wage-Suppression Class Action Battle With MMA Fighters

By Gerald L. Maatman, Jr. and Sean McConnell

Duane Morris TakeawaysOn January 18, 2024, Judge Richard F. Boulware II of the U.S. District Court for the District of Nevada denied Defendant’s motion for summary judgment in a wage suppression antitrust class action and declined to exclude two of Plaintiffs’ key experts in Le v. Zuffa, LLC, No. 2:15-CV-01045 (D. Nev. Jan. 18, 2024). The Court rejected defense arguments that summary judgment was appropriate on largely the same grounds that it certified the class on August 9, 2023, including arguments that the statistical model of Plaintiffs’ expert was flawed because it failed to include everyone in the sport and failed to consider the ways promoters help fighters develop into bigger stars. Defendant also argued that there was no dispute that there are more UFC fighters, more fights, and better compensation than at the start of the class period; however, the Court found sufficient evidence that UFC may have used its market power to suppress wages in any event.

 Le v. Zuffa is the first labor monopsony case ever, and the ruling in is required reading for any corporate counsel handling antitrust class action litigation involving wage-suppression issues.

Case Background

Plaintiffs are current or former UFC fighters. Defendant, Zuffa, LLC does business as UFC and is the preeminent MMA event promoter in the United States. Plaintiffs allege that UFC used exclusive contracts, market power, and a series of acquisitions to suppress wages paid to UFC fighters during the class period by up to $1.6 billion. Plaintiffs filed suit in December 2014 and defeated UFC’s motions for partial summary judgment in 2017. In February 2018, plaintiffs moved to certify two classes. A class consisting of all persons who competed in one or more live professional UFC-promoted MMA bouts taking place in the United States from December 16, 2010 to June 30, 2017 was certified last August (our prior post on that ruling is here).

In light of the class certification, Defendant renewed its motion for summary judgment and moved to exclude expert testimony. The Court struck two of Defendant’s motions to exclude and denied summary judgment. As a result, the case is scheduled to start trial on April 8, 2024.

Denial Of Summary Judgement

The Court rejected Defendant’s arguments for summary judgment on grounds that they were repetitive and unavailing.

Specifically, Zuffa argued that the total number of bouts, fighter compensation, and fighters all increased during the class period, that there are no barriers to enter the fight promotion market, and that it did not prevent competitors from signing and promoting fighters. The Court found that the fact that the raw numbers of fighters, bouts, and compensation increased is not dispositive and credited Plaintiffs’ evidence that their wages were still suppressed. The Court also noted that it expressly rejected Defendant’s arguments regarding barriers to entry and completion in the class certification decision.

Implications For Employers

Le v. Zuffa has the potential to be a landmark labor antitrust class action.

The Court credited evidence establishing that UFC has anticompetitive power on the buyer-side market of purchasing fighter services and that it used this power to harm all UFC fighters. Like other labor antitrust cases, Le v. Zuffa could be an important test of workers’ ability to use antitrust law to tilt labor market dynamics in their favor and to increase workers’ bargaining leverage for greater compensation and benefits.

New York Federal Court Denies Class Certification To Chemical Purchasers In Price-Fixing Antitrust Case

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways:  On December 28, 2023, Judge Elizabeth A. Wolford of the U.S. District Court for the Western District of New York denied a motion by Plaintiffs – purchasers of caustic soda – for class certification under Rule 23(b)(3) in Miami Products & Chemical Co., et al., v. Olin Corp., et al., No. 1:19-CV-385 (W.D.N.Y. Dec. 28, 2023). Judge Wolford refused to certify the putative class of caustic soda purchasers because individual issues predominated over questions common to the class and because the proposed class was not objectively ascertainable. As one of the final class certification rulings of the year, the decision is instructive reading for corporate defendants facing class-wide claims of alleged price-fixing.

Case Background

Plaintiffs alleged that they purchased caustic soda, a chemical co-produced with chlorine that is used in a variety of industries, from Defendants between October 1, 2015 and December 31, 2018. Defendants are the five largest producers of caustic soda sold in the United States. Plaintiffs asserted that Defendants unlawfully conspired to raise prices of caustic soda. Specifically, Plaintiffs claimed that Defendants violated antitrust laws by engaging in parallel conduct of announcing and implementing over a dozen price increases during the class period that resulted in prices of caustic soda rising by nearly 10% more than prices would have otherwise existed absent the alleged cartel.

The Court’s Order Denying Class Certification

Plaintiffs moved for class certification under Rule 23(b)(3). Defendants mostly focused their opposition on grounds that the Plaintiffs did not adequately represent the proposed class, that the claims were not typical of the proposed class, and that individual issues would predominate. Plaintiffs’ proposed class excluded purchases of caustic soda during the class period pursuant to contracts because the alleged anticompetitive price increases would not have impacted the contract prices.

The Court issued a 51-page ruling in denying Plaintiffs’ motion. To determine whether there has been class-wide injury, the Court noted that there must to be a reliable methodology for whether particular caustic soda purchases should be included or excluded from the class. The Court concluded that the methodology of Plaintiffs’ expert could not accurately determine whether a particular purchase fell within the class or not. The Court also opined that Plaintiffs could not establish an alternative common proof of class-wide impact because of the complexities of determining the prices paid for caustic soda during the class period; therefore, individual questions would predominate over common questions.

The Court also concluded that three of the proposed class members did not use the same price negotiation strategy as Plaintiffs; therefore, the Court held that Plaintiffs failed to demonstrate typicality. Finally, the Court determined that Plaintiffs failed to meet the ascertainability requirement because Plaintiffs failed to adequately define the contract purchases that were to be excluded from the proposed class.

Implications Of The Ruling

The Court’s ruling is important for antitrust class action defendants accused of price-fixing. The decision highlights the difficulties of earning class certification in antitrust cases where putative class members may not have always paid supracompetitive prices, in particular in markets characterized by complex pricing methodologies.

Seventh Circuit Breathes New Life Into Ex-Workers’ Antitrust Wage-Suppression Class Action Battle With McDonald’s

By Gerald L. Maatman, Jr. and Sean P. McConnell

Dane Morris Takeaways: On August 25, 2023, Judge Frank Easterbrook of the U.S. Court of Appeals for the Seventh Circuit published an opinion in which a three-judge panel held that Plaintiffs — former McDonald’s workers — alleged a plausible violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 in Deslandes v. McDonald’s USA, LLC, Nos. 22-2333 & 22-2334 (7th Cir. Aug. 28, 2023). The Seventh Circuit rejected the district court’s conclusion that plaintiffs failed to allege a per se violation of Section 1 because the horizontal no-poach restraint alleged by plaintiffs could be a naked restraint between competitors rather than a restraint ancillary to the success of cooperative venture. Instead, the Seventh Circuit concluded that additional discovery, economic analysis, and potentially a trial could be required to resolve the issue.

The ruling in Deslandes v. McDonalds is required reading for any corporate counsel handling antitrust class action litigation involving no-poach or non-solicitation issues.

Case Background

Plaintiffs, a group of former McDonald’s workers, brought a class action over alleged antitrust violations in the U.S. District Court for the Northern District of Illinois. Defendants McDonalds USA, LLC and McDonald’s Corporation (collectively, McDonald’s) operate fast-food restaurants or do so through a subsidiary, and until recently, every McDonald’s franchise agreement contained a provision prohibiting any franchise operator from hiring any person employed by a different franchise or by McDonald’s itself until six months after the last date that person had worked for McDonald’s or another franchise. Plaintiffs allege that they were unable to earn higher wages at other franchises while these provisions were in effect. The district court dismissed the complaint, and Plaintiffs appealed.

Case Remanded for Further Proceedings

A horizontal agreement between competitors could be considered a per se violation of Section 1 of the Sherman Act or it could be considered a violation under the Rule of Reason. Per se violations are reserved for certain agreements, like price-fixing or market allocation. All other arrangements by competitors are considered under the Rule of Reason, which includes an assessment of the relevant product or service market and a defendant’s (or defendants’) power in such market. The assessment of market power typically includes an analysis of market share and barriers to entry and expansion, among other factors.

Here, Plaintiffs did not allege that McDonald’s had market power in the market for labor at its restaurants, and the Seventh Circuit agreed with the district court that there was so much competition for fast-food restaurant workers that McDonald’s could not have had market power. Nonetheless, the Seventh Circuit disagreed with the district court’s determination that Plaintiffs had not alleged a per se violation.

A no-poach clause (or any other clause) is considered ancillary, rather than naked, if it is ancillary to the success of a cooperative venture. The district court concluded that Plaintiffs had not alleged a per se violation because the no-poach clause was ancillary to the franchise agreement in that it expanded the output of burgers and fries and led to the success of the cooperative venture between franchises. The Seventh Circuit disagreed with this analysis because “it treats benefits to consumers (increased output) as justifying detriments to workers (monopsony pricing).” Id. at 3. While the Seventh Circuit recognized the possibility that the no-poach clause could have been protecting franchises’ investment in training, it found that selling more burgers and fries to consumers is immaterial to justifying any detriment to workers from the provision and remanded the case for further proceedings on the question.

Implications For Employers

Deslandes v. McDonald’s is notable in that it opens the door to significant discovery, economic analysis, and potentially even trial proceedings to determine whether a no-poach (or similar employment provision) is ancillary to an agreement or a naked restraint that can be adjudicated only on the pleadings. The Seventh Circuit also signaled that the fact that the no-poach provision was nationwide in scope (rather than limited to a particular labor submarket) and that fact that the restriction lasted for the duration of employment and an additional six months (rather than limited to the time to recoup training investment) could tend to show that the no-poach clause was an illegal means for suppressing wages rather than a reasonable restraint to further the success of the overall franchise. Employers utilizing no poach agreements are well-served to consider the Deslandes ruling in detail.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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