More than a century after the US Congress first passed the Sherman Antitrust Act, the Antitrust Division of the Department of Justice (DOJ) announced a new application of the law: Beginning in 2016, it intended to expand the Sherman Act into the labor markets and begin prosecuting, for the first time ever, non-solicitation or “no poach” agreements as felonies.
High-profile healthcare company DaVita and its former CEO, Kent Thiry, were the first to be targeted under DOJ’s new approach. They were each indicted on three counts of criminal conspiracy to allocate the market for employees by allegedly entering into non-solicitation agreements with three other companies.
Because this was the first criminal “no-poach” trial ever prosecuted by DOJ, DaVita, Thiry and their defense team at McDermott found themselves in uncharted territory. Led by Jeff Stone and Dan Campbell on the trial side and former federal prosecutor Justin Murphy in antitrust, McDermott represented Thiry from the earliest days of the criminal investigation. Along with additional regulatory and litigation counsel from several other firms, the McDermott legal team communicated closely with its client in mapping out a path to success.
The stakes were high, posing an existential threat for both Thiry and DaVita. If found guilty, Thiry faced the possibility of substantial jail time and a large financial penalty. DaVita faced regulatory risk under Medicaid, Medicare and private insurance statutes—all of which threatened the company’s ability to continue operating.
The legal team knew that it faced a high burden. The only acceptable outcome was to secure a “not guilty” jury verdict for both Thiry and DaVita on all three counts of criminal conspiracy. A conviction on even one count would be a failure.
The criminal jury trial lasted 10 days, including two full days of jury deliberations. At the end of the case, the jury acquitted Thiry and DaVita on all counts—a seminal decision that vindicated Thiry’s and DaVita’s rights, allowed both Thiry and DaVita to return to normalcy, and struck a serious blow to DOJ’s attempt to expand the reach of the Sherman Act.
Two aspects of the team’s legal strategy stood out:
First, the defense worked hard to shape the law of the case from the outset. They moved to dismiss the indictment in its entirety, contending that DOJ’s attempt to treat the alleged crime as a per se violation of law was unprecedented and unwarranted. Although the judge did not grant the motion to dismiss in its entirety, he did accept many of the defense arguments and required the prosecution to prove that the defendants acted with the specific intent to constrain the labor markets. That proved to be a near-fatal blow for the government. The government had hoped to apply a per se legal standard, in which the mere existence of any “no poach” or non-solicit agreement would constitute a crime. In ruling on the defense motion at the outset of the case, the judge concluded that although the case would survive the motion to dismiss because the indictment sufficiently alleged the per se standard, the government would bear a much heavier burden of proof at the trial itself: DOJ would have to prove that the defendants intended to allocate the market for employees. That ruling set forth a pathway to victory.
Second, the defense structured its trial strategy to navigate the pathway contemplated by the judge. The defense team wove the facts of the case into the nuances of the law laid out by the judge. By consistently hammering on these points, the defense convinced the judge to instruct the jury at the end of the case that DOJ had to prove beyond a reasonable doubt that the defendants acted with the intent or purpose to allocate the markets for employees, and in trying to achieve this end, they sought to “end meaningful competition.” It proved to be a burden that the government could not meet.
In developing the strategy of weaving the law and the facts together, the defense team adopted a multi-pronged approach:
Shaping legal precedent: The team used the lack of precedent in this area to inform their legal arguments, leaning on a deep understanding of antitrust law with a specific emphasis on the nuances of the per se standard. This antitrust experience proved critical to the ultimate victory and shaped every aspect of the case.
Mastering the facts: In advance of the trial, the team prepared relentlessly, working hard to uncover every fact encompassed in more than 1.8 million documents and approximately 75 witnesses that were interviewed by DOJ. This was particularly important given the scope of DOJ’s three investigations, in which a few of those witnesses were interviewed as many as 15 times.
Testing and staying on message: The team also focused on crafting a straightforward, simple message for the jury. Using careful research techniques and mock juries, the team tested different ways of communicating its themes to the jury, curating an approach that balanced the law, the facts and the equities. Without this preparation, the powerful defense message would have been lost in a morass of irrelevant facts presented by DOJ.