The Justice Department’s announcement last week that it was bringing antitrust charges against DaVita Inc. and its former CEO Kent Thiry grabbed my attention for a reason different from what most others found compelling. The case was widely reported based on the high-profile local targets, but the case is built on a novel legal theory that should concern most Colorado employers.
This is an interesting choice of a test case for the Biden Administration. As a candidate, Joe Biden promised bold action on antitrust enforcement and six months into his presidency he delivered with an executive order cracking down on the use of non-compete agreements in the private sector, saying these agreements are limiting the ability of workers to move between good jobs in the same industries.
Citing century-old antitrust laws, this administration argues that non-compete agreements are especially unfair to blue collar and working-class Americans. This is clearly a worthwhile end goal, but has little to do with the test case they chose in Colorado.
The Justice Department creates the premise that this is an antitrust issue by alleging DaVita and Thiry conspired with “competing employers” to “suppress competition for the services of certain employees.”
But, as lawyers and commentators have already pointed out, the companies do not even appear to be competitors – one is a surgery center, and the other is a dialysis clinic- so you start with shaky foundation whether this is even an antitrust case at all.
The case does not even appear to be aimed at the right target. While President Biden is focused on stepping up antitrust enforcement to protect “blue collar” and “working class” Americans- this is not that case. The employees that DaVita and Thiry allegedly restricted the negotiating rights of were actually highly-paid corporate executives, not middle-income workers.
What the government is actually trying to achieve through this case is a massive expansion of the anti-trust act by claiming that DaVita and the surgery company tried to behave as a sort of employment monopoly, using their size to manipulate employment markets of these highly compensated executives.
In reality, the health-care sector is one of the largest industries in Colorado and the United States. The idea that any combination of two or three companies could behave as a monopoly or insidious market manipulator, quashing the aspirations of high-net-worth executives, does not make sense.
The most troubling aspect of this case though is the fact that Congress did not pass a new antitrust law or regulation that created these legal obligations. Instead, the executive branch is attempting to create new criminal prohibitions out of a century-old law.
Paul Clement, one of the most respected lawyers of his generation who has appeared in front of the Supreme Court more than 100 times, has said the expansion of antitrust authority is illegal, and has pledged to take it to the US Supreme Court if that is what’s required:
The executive branch does not get to create new criminal prohibitions simply by unilaterally declaring conduct per se illegal.
The justifications for bringing this particular case became even more bizarre after local reporters brought to light key facts and questions. According to reports, the alleged offense occurred when two DaVita executives left DaVita to become CEOs and then butted heads with Thiry when they attempted to recruit DaVita employees.
Another local report showed that DaVita and the other companies cited in the indictment did in fact hire one another’s executives away- undercutting the heart of the case that there was some illegal “no poach agreements” when in fact these highly-paid executives were moving back and forth between the two companies.
Virtually every Colorado business is familiar with this kind of employee mobility, and has dealt with it on the basis of what they have thought is long-settled law. If the DOJ prevails against DaVita and Thiry, it would criminalize what has been fairly standard business practice, forcing businesses across the state to revisit their employment competition practices. Good news for us lawyers!
The parties will have ample opportunity to make their case through the judicial system but this is clearly not a standard antitrust action. From a legal perspective, the facts behind the charges appear strikingly thin and require a new interpretation of a 130-year-old law. While this case drew attention due to the high-profile targets located in Colorado, this is a novel prosecution that should cause every U.S. business concern.
Prior to forming a law firm in 2018, Jon Anderson was a partner at the law firm of Holland & Hart LLP and served as chief counsel to Colorado Gov. Bill Owens.