The antitrust lawsuit against Duke University is still in its early stages, but experts suggested the plaintiffs could face challenges in making their case.
Danielle Seaman, then-assistant professor of radiology, sued Duke in May 2015 alleging that she lost a job opportunity at the University of North Carolina at Chapel Hill due to an alleged no-hire agreement between the universities. This agreement violates federal antitrust law, she claims.
However, though Seaman settled with UNC—initially named a co-defendant in the case—in late October, she is pressing forward with the lawsuit against Duke. U.S. District Court Judge Catherine Eagles has preliminarily approved the settlement with UNC.
Seaman is also asking the judge to approve a class-action lawsuit that would represent not just Seaman but several other medical employees who work for Duke and UNC.
UNC does not have to pay any money as a result of its settlement, but it does commit to not entering into any future no-hire agreements and to provide testimony and documents to Seaman’s attorneys. Dean Harvey—counsel for the plaintiff and a partner at Lieff, Cabraser, Haimann and Bernstein—said that senior administrators at UNC would also have a reporting obligation if they ever heard of such an agreement in the future.
As for why the plaintiffs settled with UNC and not Duke, Harvey indicated that UNC’s special role as a public university played into it. UNC has claimed that it was immune from the antitrust lawsuit because it is a state entity, though Eagles rejected a motion to dismiss in February 2016.
Nonetheless, Harvey said the plaintiff’s attorneys concluded that there “was no reasonable argument to be made for liability for money.” Given UNC’s special defenses, they leaned towards settlement.
“All these other UNC entities, such as the health system and the university, agree to subject themselves to the jurisdiction of this court for purposes of this settlement, which would not have been possible before the settlement," Harvey said.
Duke’s attorneys could not be reached for comment. The University in the past has declined to comment, citing its long-standing policy of not discussing ongoing litigation.
Was the alleged agreement illegal?
As evidence for the alleged no-hire agreement, Seaman claims that she received an email from UNC’s chief of cardiothoracic imaging after she had expressed interest in a position at UNC.
“I just received confirmation today from the Dean’s office that lateral moves of faculty between Duke and UNC are not permitted,” the email states, according to Seaman’s second amended complaint. “There is reasoning for this guideline which was agreed upon between the deans of UNC and Duke a few years back.”
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A second email from the chief of cardiothoracic imaging states that this policy was settled upon after Duke tried to recruit the “entire UNC bone marrow transplant team,” according to the complaint.
Duke denies that there was ever an expressed agreement to bar lateral hiring, according to its answer to the second amended complaint.
According to a report by the Durham Herald Sun, Nancy Andrews, dean of the Medical School from 2007 to 2017, denied these allegations in court filings, saying she was not aware of anyone at Duke feeling prohibited from hiring UNC personnel. Other Duke employees have denied it as well, including Victor Dzau, former chief executive officer of the Duke University Health System.
Clark Havighurst, William Neal Reynolds professor emeritus of law, speculated that it might be in each university’s benefit not to poach faculty, even in the absence of an explicit agreement.
“This is probably a matter of mutual restraint as much as explicit agreement, however, as each school or department would hesitate to irritate the faculty at the neighboring institution, thus undermining collegial and personal relations that are undoubtedly beneficial to each,” he wrote in a June 2015 email to The Chronicle.
He also wrote that, even if the agreement existed, Duke might be able to argue it was pro-competitive, not anti-competitive. For example, insuring that others will not poach employees might make an employer invest more in training. It could also prevent hospitals from poaching each other’s patients, which he suggested is the type of competition antitrust law should not protect.
“It may or may not be a complete defense, but it certainly means that the agreement, if it exists, has arguable 'procompetitive' justifications and is thus not unlawful 'per se' as a 'naked' restraint of trade,” he wrote after reviewing legal documents filed by the parties in this case.
However, he emphasized that his comments are only guesses at this point since the parties have yet to present all their arguments. When Harvey was asked about potential pro-competitive justifications, he declined to respond because he said Duke has not yet raised this particular argument.
As to whether they thought the class-action lawsuit would likely be approved, both Havighurst and Tim Büthe, an associate research professor of political science, were skeptical.
“You have to prove there’s a large number of people not only on the UNC medical staff that could have been hired by Duke but weren’t, and that Duke had an interest in hiring them but restrained in order to spare UNC from losing employees,” Büthe said. “The lawyers have to prove that there is a substantial number of people who have actually been harmed. I haven’t seen enough information to suggest that that is clearly so.”
He added that winning a class-action would probably be harder than winning an individual case.
When asked to respond to this argument, Harvey said the plaintiffs were not claiming to have found a wide array of people denied the opportunity to switch institutions. Rather, he claims, the mere presence of the agreement nonetheless allowed the universities to suppress wages.
“It was an agreement that applied throughout the institution that we allege was in place for years, and the people who supervise and determine the budgets from which compensation decisions are made were the very individuals who we allege entered into the agreements,” Harvey said. “Over time the entire pay structures of these institutions are suppressed below what they otherwise would have been had they been competing like firms normally do.”
He added that Seaman had recruited two economists—Edward Leamer, an economics professor at UCLA, and Peter Cappelli, professor of management at the Wharton School of Business—to study how much wages might have been suppressed.
Leamer declined to comment, and Cappelli could not be reached for comment. Duke's answer to the amended complaint rejected these statements of economic theory.
Havighurst also suggested that this might not be an antitrust problem given the highly-competitive national market for medical faculty. It might be hard to argue damage if Seaman did not attempt to search for a job nationally, he said.
Harvey pushed back, noting that UNC might have been the only place a Duke employee could transfer into without having to buy a new home or pull their children out of school.
Ultimately, the economist’s simulations—and any competing statistical analyses introduced—might hold great sway in the case. Büthe noted that even agreements designed to be pro-competitive can be illegal if they have negative effects.
“Antitrust is not about intent, it’s about consequences, or having an agreement at all,” he said.
How important is the settlement?
Both Havighurst and Büthe expressed skepticism towards how much the plaintiffs will get out of the UNC settlement agreement.
“Saying they won’t engage in any future collusion is cheap talk,” Büthe said. “They’re already not allowed to collude so saying that they won’t costs them nothing.”
He did note that UNC cooperation could potentially be damaging to Duke if one or two UNC officials showed up in court to say there was an agreement. But Havighurst was skeptical this would happen, because for UNC to say that, would expose it to liability from plaintiffs not involved in this lawsuit.
“If they should admit in any context that they had an agreement, somebody else could come up with a claim,” he said. “I would be surprised if they would have anything that would say we conspired with Duke. That would expose them to some liability, I would think.”
UNC denied wrongdoing as part of the settlement.
Both the class-action status and the final approval of the settlement are set to be discussed in court Jan. 4, Harvey said.
Anthony Cardellini contributed reporting.