Duke University Medical Center at Duke University in Durham, North Carolina. Photo: Shutterstock

In what could be the first settlement of its kind, Duke University has agreed to pay $54.5 million to resolve a class action over an alleged illegal employee-poaching agreement with the University of North Carolina after the U.S. Department of Justice intervened in the antitrust case.

The proposed settlement, filed Monday, comes the same day that the DOJ filed a motion to intervene in the class action in order to enforce injunctive relief that would prohibit Duke and UNC from signing “no-poach” employee agreements during the next five years. The case is one of several in which the DOJ has filed statements of interest seeking to clarify the standard of review that judges should use in evaluating whether an agreement violates the federal antitrust law, the Sherman Antitrust Act.

But it's also unprecedented because previous cases in which the DOJ has sought to be involved remain pending, while a “no-poach” settlement last year came in the DOJ's own case. The Duke settlement is the first time the DOJ has been involved in settlement of a private antitrust class action over allegedly illegal poaching of employees.

“The settlement also sets forth an important and perhaps unprecedented role for the United States Department of Justice to monitor and enforce compliance with the settlement's injunctive relief provisions,” wrote lead plaintiffs counsel Dean Harvey, of San Francisco's Lieff Cabraser Heimann & Bernstein, in a motion for preliminary approval of the settlement filed Monday. “The settlement also provides an important role for the DOJ in enforcing compliance with the settlement's injunctive relief provisions. This is perhaps unprecedented; Dr. [Danielle] Seaman could not locate any other example of a class action settlement that provides an enforcement mechanism for the DOJ.”

The settlement excludes attorney fees, but class counsel said they planned to request about one-third of the settlement fund in fees and $3.3 million in costs.

Assistant Attorney General Makan Delrahim, on Monday, praised lawyers in the case for “working cooperatively with us throughout the resolution of this matter, including for agreeing to permit the United States to seek to intervene in this settlement.”

“Permitting the United States to become part of this settlement agreement in this private antitrust case, and thereby to obtain all of the relief and protections it likely would have sought after a lengthy investigation, demonstrates the benefits that can be obtained efficiently for the American worker when public and private enforcement work in tandem,” he said in a statement.

Harvey declined to comment beyond the court filings.

Gregg Levy, a partner at Covington & Burling in Washington, D.C., and Brent Powell, of Womble Bond Dickinson, who represented Duke in the case, did not respond to a request for comment. But Michael Schoenfeld, vice president for public affairs and government relations at Duke, said in a statement that Duke denied the allegations and was settling to “avoid the wasteful cost and inconvenience of prolonged litigation.”

“We will continue to vigorously compete for the best faculty who will help fulfill these missions,” he wrote in an emailed statement. “The university is and has been committed to complying with all relevant laws in recruiting the most talented physicians, scientists and scholars. Our agreement with plaintiffs and the Department of Justice to implement certain compliance measures affirms that commitment.”

The case is the latest in which the DOJ has sought to clarify its views in an antitrust class action involving a “no-poach” agreement. Last year, the DOJ reached an agreement with two railroad equipment suppliers that had cut deals not to hire each other's employees. The DOJ also has filed notes of statements of interest in a growing number of “no-poach” class actions in the past year, primarily against franchise retailers like fast-food restaurants, citing similar investigations by state attorneys general and 2016 guidance from the DOJ. That guidance said that the Justice Department “intends to proceed criminally against naked wage-fixing or no-poaching agreements,” which it deemed “per se illegal under the antitrust laws.”

In the recent spate of “no-poach” class actions against franchise establishments, the DOJ has sought to clarify that the agreements are per se illegal “unless the facts show that they are reasonably necessary to a separate legitimate business transaction or collaboration between employers.” Defendants have challenged that standard of review, claiming that judges should analyze the cases under the “rule of reason.”

Danielle Seaman, an assistant professor of radiology at Duke University School of Medicine, filed the class action in 2015. She alleged that, when she contacted the UNC Chapel Hill School of Medicine in 2015 to inquire about a position in its Radiology Department, the person in charge wrote an email back to her saying, “lateral moves of faculty between Duke and UNC are not permitted” due to an agreement “between the deans of UNC and Duke a few years back.”

In 2018, U.S. District Judge Catherine Eagles of the Middle District of North Carolina approved a settlement with the University of North Carolina that had “broad injunctive relief,” but no damages, due to immunity defenses available to a public institution. She also certified a class of faculty members in the claims remaining against Duke.

Ahead of a summary judgment hearing, the DOJ filed a March 7 statement of interest in the case, insisting that the standard of review in no-poach agreements under Section 1 of the Sherman Act was the per se rule, citing its case against the railroad equipment suppliers.

The DOJ also said that Duke did not have a “state action” defense to liability under the U.S. Supreme Court's 1943 decision in Parker v. Brown.

“Duke's expansive arguments on the 'state action' doctrine and indulgent treatment of no-poach agreements are not supported by precedent and risk significant harm to competition, consumers, and workers in North Carolina,” wrote the DOJ's Nickolai Levin, an attorney in the antitrust division in Washington, D.C.

The Duke case settled last month, prompting the DOJ to file a motion to intervene Monday in order to obtain “the right to enforce any injunctive relief.”

“The United States has a significant interest in the proposed injunctive relief because the United States enforces the federal antitrust laws, and it has repeatedly enforced the antitrust laws against anti-competitive no-poach agreements,” wrote Barry Creech, a trial attorney in the DOJ's Antitrust Division, in the motion to intervene. “Allowing the United States to intervene in this matter will further the United States' significant interest in preventing anti-competitive no-poach agreements in the future.”

Settlement documents estimate each class member's portion of the cash fund to be approximately $10,000—among the largest per capita recovery in an antitrust class action, according to court documents.

As to the injunctive relief, the agreement also provides that Duke would not enter into any more “no-poach” agreements and would appoint an “antitrust compliance officer,” train employees, report potential settlement violations to the DOJ, and allow the DOJ to inspect documents and interview employees for enforcement purposes. Duke's president, vice president and general counsel also must certify to the DOJ that they have complied with the settlement every year for five years.