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Duke and UNC: Cooperation Off the Basketball Court?

As the college basketball season heats up, bitter rivals Duke and the University of North Carolina stand accused of maintaining a cozier (and illegal) relationship off the court.  UNC, the UNC School of Medicine, and the UNC Health Care System (together the “UNC Defendants”) recently entered into a settlement agreement with a class of individuals employed by the UNC Defendants or of Duke-affiliated defendants (“the Duke Defendants”) between 2012 and 2017 to resolve an action alleging that the Duke Defendants and UNC Defendants agreed not to hire each other’s medical personnel unless the lateral hire involved a promotion.  The settlement enjoins the UNC Defendants from agreeing to refrain from soliciting, hiring, or otherwise “poaching” employees of any other company or organization.

The action was initially filed by Dr. Danielle Seaman, a radiologist employed by Duke.  Dr. Seaman alleged that she contacted UNC’s Chief of Cardiothoracic Imaging to inquire about job opportunities and was invited for an informal interview.  The complaint further alleges that Dr. Seaman was informed, in “smoking gun” emails, that “lateral moves of faculty between Duke and UNC are not permitted” pursuant to an “agree[ment] between the deans of UNC and Duke.”  Dr. Seaman, on behalf the class, sued the Duke Defendants and UNC Defendants alleging violations of Section 1 of the Sherman Act.

After several years of litigation, the UNC Defendants agreed to settle the case.  The U.S. District Court for the Middle District of North Carolina recently approved that class settlement.  Without admitting liability, the UNC Defendants agreed to refrain from entering into “no-poach” agreements for any employees, not just those providing medical services.  The UNC Defendants also agreed to provide substantial cooperation—including providing documents, compensation data, and testimony—in Dr. Seaman’s continuing case against the Duke Defendants, which did not settle.

Notably, the UNC Defendants did not pay any monetary damages to the class as part of the settlement.  The District Court found that the settlement was nonetheless fair because the class would have a very difficult time obtaining monetary relief from Dr. Roper (the Dean and Vice-Chancellor of Medical Affairs for UNC-Chapel Hill School of Medicine and Executive Officer of the UNC Health Care System), and could not obtain either monetary relief or injunctive relief from the remaining UNC Defendants because those entities are agents of the state of North Carolina and are therefore entitled to immunity under the Eleventh Amendment.  In other words, the District Court found that the best the class plaintiffs could have reasonably hoped for in continued litigation was limited injunctive relief—instead, the settlement provided broad injunctive relief and cooperation in the class’s discovery efforts in the ongoing litigation against the Duke Defendants.

The class continues to seek monetary damages against the Duke Defendants.  In addition, because the class alleges that any liability is joint and several, the Duke Defendants could be held responsible for all damages the class suffered.

This settlement comes as the U.S. Department of Justice Antitrust Division continues to focus on “no-poach” agreements.  Earlier this month, Assistant Attorney General Makan Delrahim, who is responsible for overseeing the Antitrust Division, indicated that the Division has criminal cases in the works concerning agreements by companies not to hire each other’s workers.  In addition, as we previously wrote, in 2016 the DOJ and FTC issued guidelines for human resource professionals highlighting concerns over “no-poach” agreements.  We will continue to monitor developments concerning the treatment of no-poach agreements, which is an area of focus for both government regulators and private civil plaintiffs.