In re Outpatient Med. Ctr. Emp. Antitrust Litig.

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IN RE OUTPATIENT MEDICAL CENTER EMPLOYEE ANTITRUST LITIGATION

Master No. 21-cv-00305

United States District Court, N.D. Illinois, Eastern Division

September 26, 2022

MEMORANDUM OPINION AND ORDER

ANDREA R. WOOD, UNITED STATES DISTRICT JUDGE

The plaintiffs in these consolidated actions allege that the defendant outpatient medical centers entered into an illegal agreement not to solicit or hire proactively each other's senior employees, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Now, Defendants Surgical Care Affiliates, LLC and SCAI Holdings, LLC (together “SCA”), UnitedHealth Group Inc. (“UHG”), DaVita, Inc. (“DaVita”), and Kent Thiry (together, with DaVita, “DaVita Defendants”) have filed a motion to dismiss the Consolidated Amended Class Action Complaint (“CAC”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), a motion which Defendant Andrew Hayek joins in part. (Dkt. Nos. 75, 82.) In addition UHG has filed a separate motion to dismiss (Dkt. No. 77) and DaVita Defendants have submitted a separate supplemental memorandum in support of Defendants' motion to dismiss (Dkt. No. 80). Both UHG's and DaVita Defendants' filings advance arguments for why those parties should be dismissed even if the CAC otherwise survives. (Dkt. Nos. 77 78.) For the reasons that follow, Defendants' joint motion to dismiss is denied but UHG's separate motion to dismiss is granted.

BACKGROUND

For the purposes of the motions to dismiss, the Court accepts all well-pleaded facts in the CAC as true and views those facts in the light most favorable to the plaintiffs as the non-moving parties. Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007). The CAC alleges as follows.

Defendants United Surgical Partners Holding Company, Inc. and United Surgical Partners International, Inc. (together, “USPI”), SCA,^[1] DaVita, and Doe 1,^[2] operate ambulatory surgery centers, outpatient medical centers, and other healthcare facilities. (CAC ¶ 53, Dkt. No. 57.) Broadly, the CAC alleges that SCA, USPI, DaVita, and Doe 1 are competitors in the recruitment and retention of employees across the United States that, between 2010 and 2019, were involved in a conspiracy to reduce and limit their employees' compensation and mobility. (Id.) More specifically, Plaintiffs Scott Keech and Allen Spradling (“Plaintiffs”) claim that SCA, USPI, DaVita, and Doe 1 entered into a series of agreements under which they agreed not to solicit or hire each other's employees, particularly senior employees, unless the employee had already informed their existing employer that they were looking for a new job. (Id. ¶¶ 6, 7, 53, 64.) The alleged conspiracy also involved Defendants Andrew Hayek and Kent Thiry, the former Chief Executive Officers (“CEO”) of SCA and DaVita, respectively; Defendant UHG, the current parent of SCA; Defendant Tenet Healthcare Corp., the current parent of USPI^[3]; and multiple unidentified Doe Defendants. (Id. ¶¶ 22, 24, 26, 39-42, 44-47.)

The purported conspiracy began at least by May 14, 2010, as evidenced by an email that USPI's CEO sent to certain USPI employees informing them that he and SCA's then-CEO, Hayek, had reached an agreement not to proactively approach each other's employees. (Id. ¶ 55.) Consistent with that agreement, USPI's human resources employees told recruiters on multiple occasions to avoid contacting SCA employees, as USPI could not hire SCA employees who had not first informed SCA that they were actively pursuing other opportunities. (Id. ¶¶ 56-57, 59.) Further, USPI and SCA would alert each other to potential violations of their agreement. (Id. ¶ 58.)

DaVita and SCA reached a similar agreement not to proactively solicit each other's employees by, at the latest, May 2012. (Id. ¶¶ 60-61.) Both Hayek and DaVita's CEO, Thiry, understood that neither company was permitted to “do proactive recruiting into [the other's] ranks.” (Id. ¶ 61.) In October 2015, Hayek sent an email to a human resources executive that revealed SCA had an agreement with both USPI and DaVita. (Id. ¶ 62.) Specifically, he claimed that DaVita could “recruit junior people” from USPI and DaVita, “but [SCA's] agreement is that [it] would only speak with senior executives if they have told their boss already that they want to leave and are looking.” (Id.) Accordingly, in December 2015, an SCA human resources executive instructed a recruiter that USPI and DaVita were “off limits to SCA.” (Id. ¶ 63.) And in one instance, when SCA was approached by a DaVita employee about employment opportunities, SCA informed the candidate that SCA could not consider them unless they had informed DaVita and received explicit permission that they could be considered for employment with SCA. (Id. ¶ 64.)

Moreover, on at least one occasion, Hayek alerted Thiry when SCA took some action inconsistent with their agreement. (Id. ¶ 65.)

By April 2017, the conspiracy had expanded to include Doe 1. (Id. ¶ 67.) In an April 16, 2017 email to Thiry, Doe 1's CEO gave Thiry his commitment that Doe 1 would “steer clear of anyone at” DaVita. (Id.) Later, in February 2018, Doe 1's CEO again emailed Thiry informing him that a DaVita employee had inquired about opportunities at Doe 1 but the CEO rebuffed her. (Id. ¶ 69.) Doe 1's CEO explained to the prospect that he would only discuss job opportunities if the employee “told her manager explicitly that she would like to talk to [Doe1] about a role and that [Doe 1's CEO] would talk to [Thiry] about it before [he] would discuss with her.” (Id.) Consistent with its agreement, Doe 1 regularly refrained from proactively discussing job opportunities with DaVita's current employees. (Id. ¶¶ 68-70.)

Defendants' alleged conspiracy only came to light on January 7, 2021, when the U.S. Department of Justice (“DOJ”) announced that it had indicted SCA on charges of orchestrating an antitrust conspiracy with USPI and DaVita (both identified pseudonymously in the indictment), in violation of 15 U.S.C. § 1. (CAC ¶¶ 2, 96; United States v. Surgical Care Affiliates, LLC, No. 3:21-cr-00011 (N.D. Tex. Jan. 5, 2021).) The charges arose from SCA's agreements with USPI and DaVita not to solicit or hire each other's employees without the consent of the employee's current employer. (CAC ¶ 2.) Later that year, the DOJ announced that it had indicted DaVita and Thiry on antitrust conspiracy charges based on DaVita's agreements with SCA and Doe 1. (CAC ¶¶ 7-8, 46; United States v. DaVita Inc., No. 21-cr-00229-RBJ (D. Colo. July 14, 2021), ECF No. 1.)^[4] Upon learning of the DOJ's allegations in the SCA and DaVita criminal indictments, Plaintiff brought separate civil actions against Defendants that were ultimately consolidated into a single putative class action before this Court. Plaintiffs are both former senior employees of SCA. (CAC ¶¶ 17-18, 108.) Their CAC sets forth a single civil antitrust conspiracy claim under § 1 of the Sherman Act, 15 U.S.C. § 1, alleging that Defendants entered into an overarching conspiracy to restrict competition for Plaintiffs' and other senior employees' services by agreeing to refrain from proactively soliciting or hiring each other's current employees. (Id. ¶¶ 113-18.) According to Plaintiffs, Defendants' agreement constituted a per se violation of the Sherman Act. (Id. ¶ 117.) As a result of Defendants' conspiracy, Plaintiffs claim that they were deprived of free and fair competition in the market for their services, which, in turn caused the artificial suppression of their compensation. (Id. ¶¶ 77-92, 116.)

DISCUSSION

Defendants move to dismiss the claims against them for lack of standing pursuant to Rule 12(b)(1) and for failure to state a claim pursuant to Rule 12(b)(6). Under Rule 12(b)(1), a party may make either a factual or facial challenge to a plaintiff's standing. Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015). A factual challenge occurs where “the complaint is formally sufficient but the contention is that there is in fact no subject[-]matter jurisdiction,” such that the Court can look beyond the complaint and consider evidence as to whether subject-matter jurisdiction exists. Apex Digit., Inc. v Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009) (internal quotation marks omitted). But here, Defendants make a facial challenge, which requires “only that the court look to the complaint and see if the plaintiff has sufficiently alleged a basis of subject[-]matter jurisdiction.” Id. at 443. The same standard used to evaluate facial challenges under Rule 12(b)(1) is used to evaluate motions brought under Rule 12(b)(6). Silha, 807 F.3d at 173-74.

To survive a motion under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This pleading standard does not necessarily require a complaint to contain detailed factual allegations. Twombly, 550 U.S. at 555. Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Iqbal, 556 U.S. at 678).

Defendants argue that the CAC should be dismissed because Plaintiffs lack standing and because they fail to state an antitrust conspiracy claim. To the extent Plaintiffs are able to plead an antitrust conspiracy claim, DaVita Defendants and UHG each advance additional grounds for their dismissal. In particular, DaVita Defendants contend that Plaintiffs lack standing to assert a claim against them and also attack the sufficiency of the...