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Trends in Antitrust: Regulating the Labor Market through Increased Criminal Enforcement

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Trends in Antitrust: Regulating the Labor Market through Increased Criminal Enforcement

When we think of criminal antitrust enforcement, we often think of monopolies and widespread price-fixing schemes by behemoth-sized companies. However, over the last few years, the U.S. Department of Justice’s Antitrust Division has become increasingly aggressive, particularly as it relates to alleged antitrust violations by employers of all sizes in the labor market. In this discussion of the DOJ’s renewed antitrust enforcement efforts, we will focus on recent cases involving wage fixing, no poach, and non-solicit agreements. Our presenters, who served as defense counsel in the DOJ’s first-ever criminal wage fixing case, will also share lessons that they and their colleagues have learned trying cases against the DOJ’s [markedly more aggressive] Antitrust Division.

Transcript

- I'm Paul Coggins and my colleague, Jennifer McCoy and I will be discussing recent trends in antitrust, antitrust law, antitrust enforcement. And there's been no area in white collar law that's been more talked about, more written about, than the recent spate of antitrust cases and the renewed aggressiveness of the antitrust division of the Justice Department. The Justice Department, along with some of the state AG's actions have brought some cases that frankly wouldn't have been brought in the past and have never been brought before in history with a decidedly mixed results at this point. So Jennifer and I are gonna be walking through the recent trends and what we see the future holding for antitrust enforcement.

- Thanks, Paul. And I think mixed results is putting it kindly, but let's start with why we're all here, piggybacking off of what Paul said, the Department of Justice and the Department of Labor announced enhanced enforcement of antitrust law, specifically in the labor market. And that's something that the Biden administration generally has announced as a priority. So in their press release announcing the enhanced enforcement. And this is just a snippet that we have here on the slide released in March, 2022. They announced that the DOL and the DOJ recognized the value of strengthening our collaborative relationship to enhance and maximize the enforcement of the federal laws administered enforced by the two agencies. So they actually entered into this memorandum of understanding to strengthen the agency's partnerships through greater coordination, in information sharing, coordinated investigations and enforcement activity, training, education, and outreach. So there will be more collaborative efforts on that front in the near future. That was just a few months ago.

- Any discussion of antitrust law really has to start with the Sherman Act, which is the foundation of the antitrust act. And one of the things that those who don't practice antitrust all the time are struck by is how incredibly broad the language in the Sherman Act is, on its face, it prohibits every contract, every combination, in any form, in restraint of trade or commerce among the several states. Well, on its face, it would cover a meeting of a board of directors, of a company in which they decided what price they were gonna charge or what wage they were gonna pay. That obviously makes no sense and commerce couldn't stand a restriction like that. And so despite the plain language of the statute, what's happened is it's come to apply only to unreasonable restraints of trade. And unreasonable is a concept in and of itself, that's quite broad, quite wide. And the way that has been narrowed down is through court interpretations and particularly interpretations of the Supreme Court, which come down and set the parameters of what constitutes an unreasonable restraint of trade. And that changes over time.

 

- And diving a bit further into the Sherman Act. The unreasonable restraint that Paul mentioned, they really fall into two different categories, two different ways through which they can violate the Sherman Act. So first up we have per se violations, and per se violations include manifestly anti-competitive activities that's the Supreme Court's wording, that are deemed to be always unlawful regardless of the actual consequence of the activities or the intent behind them. The Supreme Court essentially is held that such activities are so anti-competitive, that there can be no pro-competitive benefit. So doesn't matter what your explanation for the agreement is. Doesn't matter whether or not you claim that it was all in good faith, or it was in order to really bolse competitive activities somehow, or protect the Goodwill of the business. A per se agreement is unlawful essentially, no matter what, if there is an agreement, it's illegal. So traditionally courts have applied the per se rule only to agreements, which they have sufficient experience with. So when we think per se, usually we think of bid rigging, horizontal price fixing between two companies. So for instance, if two gas companies got together and said that we're gonna charge $4 a gallon, no matter what, that would obviously be manifestly anti-competitive. And it'd be a per se violation. Now, when we're talking about criminal enforcement of the antitrust laws, which is what we're focused on here, all of that enforcement is going to be with regards to per se violation. So you're not gonna see the US attorney's office come in and prosecute this next type of violation, which is the rule of reason violation. And now under the rule of reason violation, there's an fact intensive and extensive evidentiary inquiry into the alleged agreement or the alleged anti-competitive activity. So that inquiry consists of primarily two questions. One, whether the practice in question is in fact likely to have a significant anti-competitive effect in a relevant market. So whatever market, whatever industry the company is acting in, and two, whether there are any procompetitive justifications relating to the restraint. Now, again, in a per se violation, we're assuming that there can be none. So we're not asking that question. It's too manifestly anti-competitive for that to really matter. Under the rule of reason, if any anti-competitive harm would be outweighed by the pro-competitive effects, the practice is not unlawful. So there's a balancing question there, and this is gonna cover the vast majority of restraints of trade. So anything that doesn't fall under that per se category, which is saved for again, the most manifestly anti-competitive activities is gonna fall under the rule of reason, and you're gonna be dealing most often with a civil lawsuit.

- So what you're saying, Jennifer to our listeners, is if it's per se, the court's gonna say, we don't wanna hear your justification.

- Yeah, we don't hear.

- We don't care.

- Exactly.

- Now per se violations in the labor market. And as Jennifer pointed out, that's really the ball game in criminal prosecutions. And what the Department of Justice has done recently is basically try to expand what constitutes price fixing. Price fixing cases have been brought for decades as per se cases, but what hasn't been brought and what wasn't brought until this year or recent years has been wage fixing. And what the department has done is basically say wage fixing is a form of price fixing. And so the price fixing cases that the Supreme Court has deemed where per se violations applied to wage fixing as well. And what's also been expanded is what constitutes bid allocations. Our market allocation and market allocation cases have been brought here again for decades as per se cases. But what the Department of Justice has recently done is to argue that so-called no poach agreements where different companies agree not to try to hire someone from another company, not to hire from a competitor, or not to solicit someone from a competitor to jump sides that those fall within the market allocation cases. So we seen the Department of Justice try to expand what constitutes price fixing, expand what constitutes market allocation. And for example, defense council such as us in the first ever wage fixing cases filed motions to dismiss basically saying these cases, wage fixing has never been held by the Supreme Court to be a price fixing cases, has never been held by a Court of Appeals to be a price fixing cases. And there's not enough experience under these for them to be brought as per se violations. I can say those motions to dismiss did not meet with favor with the court. The courts have generally overruled, denied the motions to dismiss and held, in our case for example, the district judge held that wage fixing was a form of price fixing, and the government got past our motion to dismiss and indeed got past a rule 29 motion at trial and was able to prosecute the wage fixing case as a per se violation.

- So Paul you've had a few decades of experience in this area of law. Have you ever seen that expansion of per se liability before?

- I had not. And I think that's probably, if there's one thing to get across today is that that's a pretty radical expansion of the law. And I say radical expansion of the law because it appeared in many respects that per se violations were disfavored by the law. That basically the law was moving certainly in the criminal sphere away from per se, away from the so-called irrebuttable presumptions of harm that per se embodies. But the Department of Justice is flying in the face of that history and saying, no, we're expanding per se applicability to wage fixing, to no poach, to no solicitation, to areas of the law it hadn't previously been applied to.

- And I believe we have experience in a particular court where we filed our motion to dismiss, but there has been no court that is granted a motion to dismiss on these grounds in the labor market cases, correct?

 

- Not to my knowledge, we've been following it pretty closely. And in every one of these expansive cases we're talking about, whether it's wage fiction, whether it's no poach, whether it's non-solicitation, motions dismiss have been filed, which have routinely been denied at the district court level. Now, as I said, you'll have to have a conviction that goes up to a Court of Appeal, and that Court of Appeal, it'll ultimately end up in front of the Supreme Court, but to get there, the Department of Justice is gonna have to have a conviction in one of these new areas of the law. And that's been hard for them to come by so far.

- And that segues nicely into our next slide, where we have a list here of some of the recent criminal enforcement efforts. First we have wage fixing agreements. This includes the case in which Paul and I served as defense counsel, United States versus Gentle which resulted in an acquittal on the antitrust counts. Essentially, we'll get into this a little bit more in a moment, but the jury found that yes, while a wage fixing agreement, the court had held would be per se, unlawful and thus, we don't care why you did it, it's wrong if there was an agreement, the jury found, or at least could not find beyond a reasonable doubt that there was such an agreement. And so that resulted for acquittals for both defendants on that antitrust wage fixing count. Now there's also United States versus, I believe it may be Manke, I apologize if if I'm getting that wrong, but it is another wage fixing case. I believe it is set for trial in September of this year in Maine. And so we're gonna see more action in that pretty soon, I would imagine that is also a healthcare industry case and the next case United States versus He is also in the healthcare industry. So I believe all of these cases involve the wages of therapists or therapists like employees who are contracting with or employed by a healthcare staffing or a home health agency. So it seems that the Department of Justice is focused not just on the labor market, but specifically the labor market in the healthcare industry has been right for these cases. And interestingly, in He, it's been reported that they're nearing a plea agreement in that case. And so that would be the DOJs first successful prosecution of this per se wage fixing crime. And so we'll see how that turns out, but we were keeping a close eye on that, like Paul said, now there's also the no poach, no solicitation agreements that Paul touched on wherein employers have agreed with other employers not to poach one another's employees, not to go out and solicit one another's employees. I would point out there's a difference here between a no hire agreement, which says you can't hire anyone that comes to you, even if they're seeking out the job versus a no solicitation agreement, which says you can't go out of your way to come get our people. For instance, in the Patel case, that's a non-health care industry case that's in the aerospace field. The Department of Justice has brought this case, alleging that an agreement between an aerospace company and its suppliers that they would not solicit or poach one another's employees, the Department of Justice alleges that's unlawful. I have some experience in the labor and employment industry or law space. And I will say those agreements are not uncommon. So it's definitely something to keep an eye on there.

- And it's something that labor and employment lawyers are going to have to really bone up on because they're gonna have to advise their clients based upon some of these new cases that are coming down the pike.

- Absolutely, and as a defense attorney, I would argue that there's good reason for a company who shares information with its suppliers and cross pollinates and uses some of their employees and trains up some of their employees or certain reasons may say, look, we don't wanna give you all this information. We don't want to go through all of this work just to have you come and pick off our people who we've trained, but the Department of Justice is signaled that that may not be a good enough reason. And that reason may not matter if we're talking about a per se case. And then last but not least, we have a more traditional antitrust case that involves bid rigging and price fixing, but that still deserves our attention here when we're talking about increased enforcement, because it just resulted in an acquittal on the third trial in this case. So that I would say is almost unprecedented to have the DOJ retry these defendants three different times. The first two trials resulted in hung juries, so mistrial, and the judge in that case actually had the head of the antitrust division, come down to his courtroom and explain why he felt a third trial would result in a different or more favorable outcome for the DOJ. And obviously the DOJ heard that and decided to go forward with a third trial anyway. And it resulted ultimately in an acquittal for all of the defendants that were left. I believe there were five left at that time, just I believe last week.

- Exactly right. And in fact, the DOJ, what they did was they had 10 defendants and they paired it down to five in the third bite at the apple. It didn't help them, and what made it truly unprecedented in my mind is not just the third bite at the apple, by the Department of Justice. But it wasn't one of these things where it was hung 11 to one for conviction or 10 to two for conviction. It was a much closer like, I think the judge pointed out, it was like eight, four for conviction was the strongest the government had come out against any individual, that shows quite a bit of problems the jury's having with this particular theory of the governments. Now we've focused, and we are focusing on the criminal cases, which are coming down the pike, but there are still civil antitrust lawsuits that have picked up in these areas now, one in particular is dis Landis versus McDonald's where employees of McDonald's a challenge the no poach policy, which prohibited employees allegedly from moving between franchises, that ended with McDonald's the defendant winning. Basically they wanted the class certification, class certification was denied in that case. And similarly, the court denied the Department of Justice's request to file a statement of interest on behalf of the employees in that case. And basically arguing, it should be undertaken under a per se analysis rather than a rule of reason analysis. So, this as I said, speaks further toward what Jennifer was talking about in the labor and employment field, even if you're not falling under criminal prosecution, your client, if it's not advised properly on what it can and cannot do in terms of solicitation, in terms of no poach may wind up in a class action lawsuit.

- And another area of law that it touches on is even the murders and acquisitions field. So the DOJ prior to the McDonald's case had filed a similar statement of interest in a case called Beck versus Pickard Group. And my understanding is that that it was challenging a non-compete agreement that was entered into, by a former employee who sold the business to this new employer. And the non-compete was going to kick in after the former owner had ceased being employed with the new company. So it was a new competitor and a potential competitor after he had ceased being employed by the company. And the DOJ said, no, they're now competitors. This guy now wants to go on and open up his own shop. And this non-compete that was entered in the context of a deal is anti-competitive and should be treated as such. So that's an interesting, that touches on some corporate law that we'll all have to be aware of as well.

- And of course, if you can shoehorn the allegations against your company, into the rule of reason arena, then you know you're facing civil. You could face a civil investigation by the government. You could face civil lawsuits, but there will not be a criminal prosecution as long as you can convince the prosecutors, you can convince the government, there is no per se violation here.

- And as we'll see you here in a little bit, that rule of reason case would come with much friendlier jury instructions for the defense than a per se case would.

- For sure.

- As Paul and I have experienced. So speaking of the per se cases, we can turn next to the case in which Paul and I recently represented one of the defendants at trial, the US versus Gentle. It started as an FTC investigation into some text messages. And the FTC is I'm sure most on this call or the C notes, enforces antitrust and consumer protection laws that include the Sherman Act, which we've talked about. So the FTC is usually, that's really the agency that's in charge of making sure the economy works. Everything stays competitive, all of that good stuff. So they can punish even an invitation to collude. So if I were to ask, I don't own a company, unfortunately, but if I did own a company, and if I were to ask a competitor to suppress wages of our employees, that would be an invitation to collude. Even if the competitor came back and said, no, absolutely not, you were crazy. That's enough for the FTC to get involved. And they can punish that invitation. They don't need an actual agreement. And that is how they treated the text messages that were at issue in this case, essentially one of the defendants neur gentle had texted in a span of five minutes, four different competitors floating the idea of wage decreases based on some changes in the market, based on Medicare slashing reimbursements to home health agencies, who in turn even applied an even deeper slash to their reimbursements, to therapy staffing companies, which the kind of company that Mr. Gentle owned. So he sent these text messages to four competitors. One of the competitors sent the text message that he received from Mr. Gentle to the FTC and said, I'm a little concerned about this, wanted to send it y'all's way. And the FTC conducted a preliminary investigation into those text messages. There was hours and hours of testimony taken at investigative hearings, including the testimony of Mr. Gentle and his employee, Mr. John Rogers, the competitors who received the text messages and the FTC also obtained other phone conversations, other documents through voluntary access letters, civil investigative demands, and really did conduct. It was again a preliminary investigation, but at least conducted an investigation into these text messages to some extent, the investigation ultimately resulted in a consent decree between the FTC and Mr. Gentle, as well as Sherry Yarwell. Now Sherry Yarwell received some text messages from Mr. Rogers, the employee of Mr. Gentle. And we'll get into those more, but expressed some enthusiasm over the thought of suppressing wages of therapists. So she and her company eventually entered into this consent decree with the FTC, and the consent decree included 20 year obligations for the companies of Mr. Gentle, Ms. Yarwell, and those individuals themselves. And so those are still going on. Now, this FTC investigation obviously turns into a case brought by the DOJ, otherwise we wouldn't be here talking about it, but we'll focus first, Paul, on some of those text messages provide some more context.

- Yeah, and keep in mind the distinction that Jennifer just mentioned to you between an invitation to collude and an agreement to collude. The FTC clearly has jurisdiction over invitations to collude, invitations to fix prices. And so this was a righteous FTC investigation. We don't want to drill too deep into the weeds, but we thought we would highlight some of the text messages, a couple of them that shows why the Department of Justice. We think why the Department of Justice jumped on this case. On the slide, you can see in the middle of the page, a text message that was sent by Mr. Gentle, that reads, "I am reaching out to my counterparts about lowering PTA, that's physical therapists' assistant rates to $45. What are your thoughts if we all collectively do it together? I have YTS a competitor on board and asking dwell another competitor." So this is a message that goes from one competitor to another competitor. And you would be hard pressed to argue that this is not an invitation to collude, but we'll have to talk later about whether it constitutes an agreement. Now, if you turn to the next page and I won't walk through all this material, but if you focus on the middle of the page and the very short paragraph, the very short sentence where a competitor says, yes, I agree. So the Department of Justice looking at this quite literally says, we have an invitation and it is a follow up to that invitation. In a later email, we have a competitor saying, yes, I agree. So the Department of Justice almost thought we've got a slam dunk here. We've got the invitation. We've got a competitor saying, yes, I agree. What more do we need to bring this case? And as we're gonna talk about with the per se analysis, it doesn't no matter what kind of anticompetitive effect, even if none, what the justifications are, we're home free.

- Right, and like Paul said, it seems that the DOJ really jumped on these text messages. They were referenced following the FTC investigation and the consent decree being entered into, in a press release that was issued by the federal trade commission. And our understanding is that following the issue into that press release, someone in the DOJs antitrust division reached out to the FTC. So oftentimes when there's this collaboration between those different groups, the FTC has referred a case that they feel warrants criminal prosecution to the DOJ or the DOJs antitrust division. Here the FTC did not actually refer the case, rather the DOJ saw the press release and in its kind of renewed focus and attempt to bring this new prosecute of theory of wage fixing being a per se violation of the Sherman Act. I think they thought that, like Paul said, this was kind of a slam dunk. We've got the agreement in these text messages. What more could there be? And so they requested the FTCs preliminary investigation file, which obviously included those text messages that we just saw as well as several others. And beyond that, there wasn't a whole lot of investigating that happened. There was not a substantial grand jury investigation that preceded the indictments in this case it seems. However, one thing that the DOJ did do is enter into a corporate leniency agreement with YTS, which is the company referenced in one of those agreements. Mr. Gentle said, I have YTS on board. It is owned by Sherry Yarwell, who is a party to the FTC consent decree. Now, interestingly, Ms. Yarwell had given hours of testimony in connection with the FTCs investigation, and in her testimony to the FTC, she said there was no agreement, that when she said, yes, I agree in that text we just saw, she was really saying that she agreed therapists were underpaid, were overpaid. Not that she agreed that she and Mr. Rogers and whoever he was texting her on behalf of should in fact suppress the wages of those therapists. So essentially she's saying there's no meeting of the minds here. There's no conspiracy to meet that goal, to meet the goal of suppressing the therapist wages, she went on and on and talked about in her FTC testimony, how she was just, she used the words trash talking with Mr. Rogers. So that obviously goes to the heard of whether or not a competitor of integrity. Mr. Gentle's company actually agreed with them to lower rates.

- And one of the things that I think's fascinating about this is because the alleged agreement, according to the government took place in text messages. And I think it was important, Jennifer, that the jury understands how fast and loose text messaging can be. And when you say yes, agree, it doesn't necessarily, you're agreeing to what was said immediately before, you may be agreeing to what was said three steps before, just because of the way these things move and move so quickly. So yeah, as I said, text messages run fast, they run loose, and it was very important to get a jury that understood text here.

- Absolutely, as a member of the millennial generation, I could not agree more.

- Well, a couple of things about the government interviews in this case, and that is, as Jennifer said, the government really, the Department of Justice really had the benefit of the FTCs work product here, the benefit of the statements under oath that they had taken from at least three different people. And so the government did conduct ongoing interviews, but those interviews took place. And I think this is something that's I've seen increasingly more and more really throughout the case and even into the trial, they're interviewing people. So there's kind of no cutoff for witness interviews these days, they keep coming, but we're gonna talk about two things to watch for here. One is on the government side, you've got to be these corporate leniency agreements are critical decisions for the government to make. And it's critical for the government to make a corporate leniency agreement if it's gonna be done with the right party. Because I think it did blow up in the government's face here in the sense that our jurors believed that the government cut a corporate leniency agreement with frankly, the wrong party here. And I think that hurt the government, but then we're also gonna talk about the fate of Mr. Rogers. In the original indictment, Mr. Gentle, the owner of the company, former owner of the company was indicted by himself. Mr. Rogers was a cooperating individual, cooperated throughout the investigation, first without an attorney, later with an attorney, and the government lo and behold, after indicting Mr. Gentle alone, supersedes the indictment and adds Mr. Rogers as a party. And though he's acquitted, he has to go all the way through trial. So, one of the issues we're gonna talk about on a later show is the slippery slide between being a witness one day and a target the next day. And the paradigm shift that is entailed when somebody props for the government, it's fraught with all sorts of dangers now. So we're gonna talk about that a little bit at length in another show, but all I will say at this point, Jennifer, is the so-called immunity letter, what they call in white collar law, the queen for a day letter, it's protection, if any, is basically a big one these days, it provides almost no protection. And it certainly didn't provide any protection to Mr. Rogers from being moved from the witness category to the defendant category.

- Right, because as we were talking about with Ms. Yarwell, she received not an immunity letter, but the corporate leniency agreement, or rather her company received the corporate leniency agreement. And one thing that was really interesting about that agreement is that it provided immunity to its employees who cooperated in the DOJs investigation, which would include Sherry Yarwell. And I had mentioned earlier that she in her FTC testimony went on and on about how there was no meeting of the minds. She didn't use that language obviously, but that she did not agree to lower therapist wages in her text messages with Mr. Rogers. Now fast forward to the trial, at which time there is this corporate leniency agreement she's entered into with the government. The government has brought charges against Mr. Rogers, but not Ms. Yarwell who was a subject of the FTCs investigation while Mr. Rogers was not. And Ms. Yarwell gets on the stand and tells the jury that she in fact did very much agree to lower therapist wages with Mr. Rogers in these text messages. Granted, she says she changed her mind before any lowering actually occurred, but that's where that per se type of violation comes in because it doesn't matter whether or not she changed. In fact, did lower the wages, correct? You're just asking, was there ever an agreement, was there ever a meeting of the mines?

- Yeah, the crime here is the agreement and all the government has to establish is an agreement that falls foul of price fixing, wage fixing, whatever. But let's talk about really four strategic decisions here that the government made that I think they may need to revisit, maybe even five strategic decisions. The first has to do with using local council. There's a bench of talented prosecutors in these districts. There are 94 United States' attorney's offices. Each one has talented trial lawyers here and the antitrust division historically, and certainly in our case, did not really use local assistant United States attorneys to assist them in the motion practice, in the jury questionnaire, in the VA Dier, or at trial. And I question that, I really think that the Antitrust Department would be stronger, stronger together if they worked more closely with local prosecutors who know the judges, who know the juries, and could really help them. And they may not have the deep knowledge of the antitrust law, but let me tell you, they know how to try cases.

- And Paul you said, historically the antitrust division hadn't done that. But when you were US attorney and at the US attorney's office, did you have other agencies partner with you all for these kinds of cases?

- Absolutely, and in fact, we even had partnerships with the antitrust division, which had a field office, a regional office in Dallas at the time it's since been closed, but we partnered with the IRS, local IRS, local prosecutors worked with IRS attorneys, and we partnered with Washington all the time. And I think it makes for a stronger case and a stronger team. We've talked a little bit and I won't beat it to death, but obviously the corporate leniency issue, who do you allow into your corporate leniency program? What are they bringing to the table? And it better be a lot, particularly if you're giving corporate leniency to someone the jury thinks is at least as culpable as everybody else. This case was brought, our case Gentle was brought without any proof of any anti-competitive effect, without any actual victims, without any clear harm. And under the antitrust law, they can do that. They can, if there's an agreement, they don't have to prove anti-competitive effect. They don't have to bring a victim to the jury. They don't have to show harm to the jury, but I think jurors expect to hear that. And I think just 'cause you can bring a case doesn't necessarily mean you should bring a case. And that leads me to the last issue when you're a prosecutor. And I said in that prosecutor's desk for 12 years, one of the reasons for declining a criminal case is adequate civil remedies. Here the FTC had done a thorough investigation that reached a consent degree. And I think you could clearly have argued certainly in the Gentle case that there were adequate civil remedies here rather than bring a criminal case where there's no real victims.

- Agreed, agreed. So now turning to the jury instructions that we received. So these are specific to our case. They were the instructions that the court gave, obviously not all of the instructions, the instructions were quite lengthy. We could spend an hour going through them, I think it took about an hour and a half for the court to read them. They're very dense, understandably, but we wanted to focus in on the instructions that are unique to a per se violation of the Sherman Act. So here, the judge instructed the jury that if you should find that the defendant entered into a conspiracy to fix prices by lowering pay rates, the fact that the defendant or his co-conspirators did not take steps to effectuate the conspiracy, that one or more of them did not abide by the conspiracy or that they may not have been successful in achieving their objectives is no defense. So as we talked about, there was no anti-competitive effect. There was no harm. Granted, the DOJ, the prosecuting team did bring in some therapists whose pay was lowered following this agreement. But we were then able to explain that no, their pay was not lowered as a result of any unlawful agreement. It was the outside market forces and would've been done whether or not any agreement had been reached allegedly in these text messages. So while you can't get into, or really irrelevant is the reason for an agreement, we were able to get into the reason for the actual lowering of wages. And in doing that show that again, there was no harm here, but as the instruction goes on to say that doesn't matter, the agreement is the crime, even if it is never carried out. And Paul, I don't know about you, but I think that sitting in the courtroom and having that instruction read to the jury was maybe the worst part of the trial for you.

- Oh, oh, without question. In any trial, there are institutes, there are high points and low points. The lowest points of the trial, as far as I'm concerned was when the witnesses were talking about the emails or the text messages they received from our client, the invitations to collude. And then the other low point was listening to the jury instructions being read, the per se instructions are tough, tough, tough on the defendants.

- Absolutely. And so I will say there was a little bit of a peak, again, we were able to get some friendlier instructions, which I believe we were entitled to. It is established in the law. The court went on to tell the jury that if the defendant or a co-conspirator never acted in accordance with the agreement, well, that's not dispositive. It is evidence you may consider in determining whether the defendant or co-conspirator ever actually joined the conspiracy. So that was important here. Ms. Yarwell was saying that she did in fact agree to lower wages, but then we were able to get into at trial, the fact that she never discussed lowr wages, or even the existence of these text messages with the people in her company who were in charge of lowering wages. So did she ever really intend to do that? Did she ever really enter into the conspiracy that all goes into the jury's decision? It's obviously a fact finding question.

- Yeah, and part of the issue for the government when they face a case, if they're really gonna bring a case with no anti-competitive effect, with no harm, with no victims, one of the key points I think you have to do as a prosecutor, I'm putting on my ex prosecutor's hat now is not over promise the jury, because if you don't have victims, don't try to create victims. And I think that's a danger the government might fall into in cases where there's no anticompetitive effect of over promising. In effect, the government almost could have argued here and maybe should have argued. There was an agreement for a nanosecond for 30 minutes, for an hour, and then it disappeared. Well, that doesn't have a whole lot of jury appeal, but that's probably the real argument here.

- Yeah, it follows the law with the per se charge. It's not the most interesting crime, a jury may not come out thinking I really wanna nail this guy, but if they're following the law and you can in fact show that there was a mutual understanding and agreement for any amount of time, that would satisfy the per se instructions. Again, the issue in our case, or one of the issues in our case was whether there even was an agreement for a nano second, and while the government didn't really make that argument, I think the jury still determined that there was not, or at least not beyond a reasonable doubt. And then in keeping with the slightly more defense friendly instructions that we fought for and received on the conspiracy count, the court instructed the jury that the government must prove beyond a reasonable doubt that the members of the conspiracy came to a mutual understanding to accomplish or try to accomplish a goal or unlawful objective. I think that was really key for us. You can't just say that you agree, you have to have truly meant that you wanted to accomplish the goal or the unlawful objective in order for there to have been a conspiracy. If you are joking at the time, or if you are saying that you agree solely to get someone else in trouble, that's not gonna be enough. I will say we asked for an instruction regarding the joking. I won't call it the joking defense, but we did request an instruction that would have instructed the jury, that if someone is joking, they cannot enter into a mutual understanding. There can be no meeting of the minds if the two minds are not serious, we unfortunately didn't get that instruction, but that was something that we did push for. And so the instruction went on to say that, evidence must show that at least two competitors had a conscious commitment to a common scheme designed to achieve an unlawful objection. Again, you must find there was a meeting of the minds between the competitors as to the objective of the conspiracy. So while intent doesn't matter for a per se agreement, conspiracy obviously takes into account the concept of intent. And if someone's not really a member of a conspiracy, if they didn't really enter an agreement, there's no crime.

- Right, and basically the argument is at the end of the day, if nobody took any action based upon any of these text messages, was there ever truly an agreement?

- Right, yeah, action speak louder than words.

- Exactly.

- And then piggybacking on the instructions that we discussed, one thing that frankly, Paul and I, I think didn't think much of at the time, but has come up following our trial, a juror who was interviewed mentioned this particular demonstrative that we use in closing as being really helpful to her is the burden of proof. Obviously that demonstrative we, people generally use it in their closing arguments. It's kind of one of those run of the mill demonstratives the government did not object to it. So we were able to use that. And that juror said that she found that maybe she felt strongly that there was an agreement, but that, that wasn't enough to satisfy this really high burden that the government took on in prosecuting this case. So obviously that's something to emphasize just in any criminal case, but particularly when you have, like Paul said, text messages, which can go either way, they can be misconstrued, a lot is lost in translation. Do you really know what's going through the mind of the recipient or the person sending those text messages at the time? I think that played really nicely into that burden. So looking into the future, Jennifer, that they're gonna continue bringing these wage fixing cases, the no poach cases, the no solicitation cases, they will be appealed. They will go to the Supreme Court and ultimately the Supreme Court's gonna have to decide this expansion of per se liability. It raises due process issues. It raises other constitutional issues. This is all gonna be years, maybe decades in the future. It's going to play out, but first I've gotta get some convictions to take up on appeal.

- Do you think Paul, is there a chance that time will be on the government side there? And that by the time you end up in the Supreme Court, assuming there's a conviction and an appeal that gets there, is the court gonna say, well, now there's been tons of these cases? Now we have the experience necessary to deem these per se violations?

- Well, you're really looking at Supreme Court cases though, and Court of Appeal cases. And there'll be a lot of di district court judges. Number of district court judges have already weighed in and denied most of the dismiss, but it really hasn't played out on the appellate field yet. He allowed the jury to ask questions. In our criminal trial, I've actually had that, the jurors were allowed to write out questions. And if any side, objective to the questions, the judge didn't ask them, but I think it kept the jurors very engaged in our trial. We had the great benefit of being able to talk to the jurors after the trial.

- Okay, we're picking back up. This is a message for Quimby. We are picking back up following slide 15, which is the last jury instruction slide. We are going back around to the burden of proof slide. So if possible, we wanna go ahead and cut out the conversation that we've previously had about the burden of proof slide and start anew from the end of the jury instruction slide, which is slide 15. So we're gonna pick up there starting now. And as with most trials, this day of the jury instructions, we also had our closing arguments. And in this case, our judge actually read the instructions immediately after closing arguments, but we obviously were able to incorporate, at that point, we knew what the jury instructions would be. The court had taken all of our objections into consideration and given us copies of what would be read. So we integrated those into our closing argument, and we also integrated the burden of proof about which obviously there was a jury instruction, believe it's just a Texas, a fifth circuit pattern instruction that we have for the burden of proof. But as we all know, that doesn't give a whole lot of color to what the government's burden of proof is in these criminal cases and guilt beyond a reasonable doubt is a very hefty one. So as many defense attorneys do, we included a slide, a demonstrative in our closing argument to help better explain the burden of proof that the prosecution took on in this case to the jurors. And frankly, I think Paul and I didn't think a whole lot about that slide, as criminal lawyers, we take that for granted, that we all understand what the burden of proof is. However, following the acquittal on this count, following the trial, there was a juror who was interviewed, I'm not sure if it was Bloomberg Law 360, but she spoke about this particular slide that we have here, the burden of proof slide and said that in looking at that during closing and really thinking about her feelings and whether or not she felt there was an agreement, she realized that she felt strongly there was an agreement, but she did not feel that beyond a reasonable doubt, there was an agreement. So she really parsed through that. And I thought it was really impressive. And as a young attorney made me feel good about how hard jurors work to follow the law in these cases, but the government did not object to our burden of proof slide at the time, I would anticipate that we will draw some objections the next time we plan to use it, because we definitely will be using some variation of that to help explain that to the jury. And I think it's especially helpful in cases like ours, where there are communications or facts that are up for interpretation, such as these text messages, like Paul said, a lot gets lost in translation there, you're using text messages fast and loose, and it's hard to keep up and tell what the recipient was thinking or what the person was really meaning when they texted yes, I agree. So I think just being sure to harp on that burden is a good lesson to take away for this and really any criminal trial in the future.

- Yeah, and a couple of interesting things about the general trial in particular, that we did, first of all, it's the first criminal trial I've been involved in, in 40 years in which the judge allowed the jurors to ask questions of the witnesses. They asked questions in writing. I've heard of that in civil cases. It was new to me in criminal cases. If any party objected to a question being asked, it wasn't asked of the witnesses, but in retrospect, Judge Maza allowed it. And I really think that it helped the jurors pay attention to the case. I thought our jurors were very engaged in the case. And we also got the great benefit in a trial, which lawyers should pay any premium of getting to talk to the jurors after the trial. And they were as Jennifer indicated, we're very open in talking to us. So they were engaged. They paid attention, they followed the instructions, and as jurors tend to do, they wanted to get it right. Now, we've talked a little bit, we've touched a little bit about the ramifications of the expansion of per se criminal liability in this area of the law. And one of the things that really to look for in the future, we're talking probably five, 10 years into the future is how this expansion plays out on the Court of Appeal's level, how it plays out at the Supreme Court level, because certainly the Department of Justice did take it as something of a victory that they're getting past the rule 29, motions to dismiss during the trial. They're getting past the motions to dismiss stage and the Department of Justice ceases support for the expansion at the district court level. But we're still waiting for those convictions, not guilty please, Jennifer, but convictions that can be appealed to the Court of Appeal's level and Supreme Court level, because one of the things this expansion is gonna butt up against is gonna run up against, is this contraction of irrebuttable presumptions. And within the confines of this per se liability are a bunch of irrebutable presumptions that this stuff is bad. There's no justification that warrants it, it's unlike a rule of reason case. So, I just think that the last word on the expansion of per se liability has not been written yet. And it won't be written until these cases reach the Supreme Court.

- Yeah, the anti-competitive, or I'm sorry, the pro-competitive benefits that that's an interesting point because in the per se liability context, you're assuming there are no pro-competitive benefits that can justify this type of a restraint. That ship is kind of sailed. You're not arguing that at trial, but the fact that there are labor and employment lawyers and mergers and acquisitions lawyers that are dealing in no poach no-solicit agreements every day for their clients to protect the Goodwill of the company, to protect the value of the company that was just purchased. I think that those attorneys would disagree that there's no pro-competitive benefit for these agreements, wouldn't you?

- Right, and once you allow pro competitive benefits to come in, as I said, you've shifted the playing field from the criminal side to the civil side where probably a lot of these should play out, and particularly should play out if you're in the no harm, no foul territory.

- And as we mentioned, one thing I wanted to go back to, while there was no harm, no anti-competitive activity, in our case, the DOJ did, I mentioned they did call up several therapists or several two therapists whose pay was cut following this agreement. So temporally, the pay cut came after the agreement, but the jury did not buy. And I believe rightfully did not buy the argument that they were cut as a result of this agreement. So again, while you can't get into pro competitive justifications, while that's not part of the inquiry for a per se violation, 'cause there really is no inquiry, it's just did it happen or did it not? I would say don't shy away from still talking about the market pressures and whatnot and giving the jury a full picture of what happened. Because I think if the jury would've left the courtroom thinking that those physical therapists pay, that they were cut because of the agreement that could have been a different outcome.

- Absolutely, and it goes to a point we made earlier, and it's true, whether you're a prosecutor or defense lawyer, frankly, any lawyer never over promised the jury. And I think when you promised the jury in your opening that you're gonna be putting victims on the stand, you better have some victims to put on the stand because frankly the jurors here did not see any victims on the stand.

- Right, and one thing that stood out to me in the vein of over promising is I believe the government said in their closing argument that had the FTC not come in and stopped this, the defendants would've fixed the entire market, the entire home health market, at least in DFW. And we learned through the trial that that is comprised of hundreds, several hundreds of companies. And so again, I think that was over promising the jury.

- That was a pretty gross exaggeration.

- Yes.

- Our guy was a little guy in a big market. And so, the idea that he could swing everything was pretty fastfull.

- Right, and again, especially when you don't need 'em to fix the whole market, it's a per se violation. You just need an agreement, which there wasn't, but had there been going forward and saying they were gonna fix the whole market, I think that's just, it's unnecessary.

- Yeah, and one of the things that's really interesting and then take a look at these cases is the cases in which they prosecute individuals such as our case, where they prosecuted two individuals versus a case where they prosecute companies, but no individuals. And they have a couple of those pending now. It's hard to make rhyme or reason out of why individuals get prosecuted in certain matters, but only companies get mattered because companies can only act through individuals.

- Yeah, that's a very good point. And it seems that individuals have been more of the focus of these labor market cases. But we've seen both. So that's an interesting point. So moving on to the key takeaway is to sum things up before we run out of time and Paul feel more than free to jump in here. I think we can all agree. Well, we can't all agree, but we would argue that if you, or deciding whether or not to bring a criminal case, a big consideration here should be whether there are adequate civil remedies, you should be mindful if you're a defense attorney of your client's participation in those civil proceedings, to the extent they have already occurred. So obviously our client, we did not represent him in connection with the prior FTC investigation, but he was represented. And he did sit down for, I believe about six hours with the FTC and give testimony on the record under oath about these issues. Now I think that at that time, no one expected there to be a follow up criminal investigation to something that was being dealt with civilly. And again had never, at that time, been treated as a per se violation of the Sherman Act, had never been prosecuted that way or at all. So it's understandable that you wouldn't necessarily invoke the fifth amendment when you just think that there's no universe in which a criminal prosecution follows the FTC proceeding, but here it did. And there was an obstruction charge that came in connection with that, that kind of muddied the waters and was thrown in by the DOJ early on in the case. So definitely be mindful of your participation, your client's participation in those civil proceedings that could now be followed by criminal proceedings. Again, as Paul mentioned, the DOJ, they seem to the antitrust division has the same playbook, which makes sense. In our case, as well as other cases that we have spoke to defense counsel about, there's a never ending investigative process, particularly aimed at interviewing witnesses. I believe there was one night, it was it a two week long trial?

- Two weeks.

- I believe it was about two week, one night during trial. I believe I had an email at about 11 o'clock at night with some 302s in it. So it was an ongoing thing. We were receiving 302s up to the end of trial. So, look at those, have your eyes open for 'em and use 'em, that led us to one of those 302s led us to call someone to the stand that we otherwise might not have. So, the strategy was ever evolving. This is kind of an aside, but assume interviews were recorded. If counsel was not present, always ask if they're being recorded. We had some witnesses who were recorded by the agents, unbeknownst to them. We also had a witness who asked an FBI agent if she could record the interview, the agent said no. And I think the jury, they raise their eyebrows with that. So just to the extent recordings play in, be mindful of that. As Paul talked about earlier, cooperative interviews do not necessarily signify protection from prosecution, John Rogers, one of the defendants in our case, moved from a witness target to a defendant, at some point we can't really pinpoint when exactly that was. Well, it was certainly after the first indictment, 'cause originally our guy was indicted by himself by his lonesome. And then they superseded that indictment to add Mr. Rogers. And even though I said it was hard for us to see that Mr. Roger's story ever changed over time.

- Absolutely, absolutely. So again, he had given that FTC testimony, he was acquitted, and of an obstruction charge in connection with that, but that didn't stop them from also tacking on the obstruction charge that he then had to pay to fight in addition to the antitrust count. And then last but not least, again, the DOJ is using the courts to test this prosecuted theory, because of that, perhaps there's been a lack of plea bargains in these cases, we did not have any plea bargaining.

- Essentially none, we met with the government. I think I met with the government one time and it was clear. We made a pitch to them that it shouldn't be indicted, should not be a criminal case. It was met with stone faced resistance. We did not have a single offer past that point. And I think it's because they were dead set to test this prosecutor theory. They thought they had the case. They thought they had the text messages, and the, yes, I agree, and thought that's all they needed. And so, I think they really wanted to try this case. And that leads to the final point here, which is, we've talked about some of the bumps the DOJ has hit on the way in Gentle, in DaVita, in the chicken poultry case, which just came down the pike, the acquital of the five defendants on the third bite of the apple by the government. But the Department of Justice really appears to be undeterred by these recent losses. They really do believe they're on a mission. They do believe in this expansion, and certainly under the Biden administration, under the current leadership at the antitrust division, I foresee more of these cases being brought and more of these being prosecuted. I wouldn't be surprised to see the antitrust division, reach out more to local attorneys, to local assistant US attorneys to bounce the case off them. What kind of judge have we drawn? What kind of jurors are we gonna get in this thing? I think that would be a great benefit to the antitrust division to do it, but whether they get that help from the locals or not, I think you can count on wage fixing, no poach, and non-solicitation to be major areas for criminal defense criminal lawyers to be working on. And frankly for labor and employment lawyers to bone up on and be able to advise their clients on the risk involved in these areas.

- It should be an interesting next few months with some of these cases headed to trial. So we'll be waiting with data breath.

- Exactly, looking forward to it. And thank you, and that wraps up our session today.


Presenter(s)

Jennifer McCoy
Associate
Locke Lord LLP
Paul Coggins
Co-Chair of Locke Lord's White Collar Criminal Defense and Internal Investigations Practice Group
Locke Lord LLP

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